The biggest golden nugget from the Chancellor during his Autumn Statement was the declaration over a major stamp duty reform.
We don’t often find the conservative party following others economic policies, but after the SNP lead the way, George Osborne has seen this a fit path to follow.
Autumn Statement 2014: Stamp Duty
In October, the Scottish Government announced their plans to change Scottish stamp duty and its system over to ‘a graduated Land and Buildings Transaction Tax (LBTT)’. The change brought about a 10% tax charged on properties bought that are worth over quarter of a million pounds (£250,000). A property between £135,000 and £250,000 is charged at 2% with no tax due on properties under £135,000.
So, the Chancellor has now followed suit and announced that the plan is to “fundamentally change Stamp Duty and abolish the residential slab system.” Of course, he is referring to the rest of Britain outside Scotland. Date for this to come into affect? It already has – as of Midnight on December the 3rd.
The new system sees no tax up until £125,000, 2% tax between £125,000 and £250,000, 5% up until £925,000 and then 10% on properties up to £1.5 million and 12% on properties above £1.5 million.
This will ultimately make a huge difference to those buying lower end properties on the property ladder. For the higher end, there are benefits also as the buyer will only pay the increased stamp duty on the proportion of the value above the threshold. For example, if a house if worth £300,000, nothing is paid on the first £125,000, 2% is paid on the value between £125,000 and £250,000 with 5% on the last £50,000.
It is stated that the Stamp Duty reform is now tailored to avoid the harsh realities that the current Stamp Duty brings, where properties only £1 over each threshold are taxed the full amount for that tax bracket – such as 3% on properties over £250,000. Hopefully, this will avoid property sellers being forced to down-value properties to bring them just to save on Stamp Duty. A further advantage will benefit property buyers, as they won’t have to pay over the odds if a property in question sits slightly over the tipping point into a higher tax bracket.
The result of this? Don’t be surprised if the housing market picks up as first time buyers can finally afford their first place.