The Autumn Statement surprised many with reforms to the stamp duty threshold, replacing the previous ‘slab’ system.
Buyers of homes worth up to £125,000 will continue to not pay any stamp duty, but for homes up to £250,000, a 2 per cent tax will be charged. The same applies to houses further up the scale, but the tax amounts have also changed. Houses up to £935,000 will be taxed at 5 per cent, up to £1.5m a 10 per cent tax applies and for homes worth more than £1.5m, the stamp duty increases to 12 per cent. However, the first £125,000 of any purchase will remain untaxed so the buyer is only taxed on the money from £125,000 upwards.
According to the most recent data from the Office for National Statistics (ONS), the average house price in the UK is £271,000. Property prices increased by 10.4 per cent in the year to October 2014, with year-on-year rises of 17.2 per cent in London – well outpacing the 1 per cent inflation rate.
David Hearne, chartered financial planner at London advisers Satis Asset Management, said, “The previous system was inefficient and forced buyers and sellers to make difficult decisions, particularly if their houses were worth £250,000 to £260,000 or £500,000 to £520,000.
“It was usually the sellers who had to accept lower offers in recognition of the stamp duty costs their buyers would face. The changes will make a more efficient market, driven by valuations, not bands.”
The changes will have the greatest benefit at the lower end of the price scale. Abolishing the distorted single slab rate was welcomed by many, and could prove positive for the Conservatives pre-election.
This policy may force Labour to rethink their proposed ‘mansion tax’, under which owners of properties worth more than £2m would face an annual charge.
