In the Autumn Statement the Chancellor announced that Stamp Duty Land Tax (SDLT) will be changed to a graduating system, with the SDLT due on a transaction being calculated according to the proportion of the price that falls within the different bands. Previously SDLT was charged at a flat rate depending on which band the total purchase price fell into.
The changes will apply to residential properties completed on or after 4 December 2014. Where contracts have been exchanged on or before 3 December 2014, and the transaction is completed on 4 December or later, you can choose whether to use the old or the new rules.
There is no change to how SDLT is calculated on purchases of non-residential property or on the rent payable when a new lease is granted.
The new rates are:
Up to £125,000 – Zero
Over £125,000 – £250,000 2%
Over £250,000 – £925,000 5%
Over £925,000 – £1,500,000 10%
Over £1,500,000 12%
The Chancellor has said that 98% of house buyers will benefit from the SDLT changes. Somebody who bought a house before 4 December at a price of £130,000 would have paid £1,300 SDLT. From 4th December the SDLT would now be £100. Somebody who bought a house at £275,000 before 4 December would have paid £8,250. Under the new SDLT rules the charge would be £3,750.
The big winners will be sellers whose properties are worth just more than the previous upper limits of the bands. The old SDLT rules had distorted the market because buyers were put off buying properties at a price just above say £250,000 because the SDLT payable leapt from 1% of the price to 3%. The reforms are not good news for everyone however. A purchaser of a house at a price of £2,000,000 will pay £53,750 more under the new system.
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