Autumn Statement delivers radical shake up to stamp duty

3 Dec 14

Radical changes to stamp duty, which will cut the tax on 98% of home sales, were unveiled in the Autumn Statement.

Chancellor George Osborne said he acted because stamp duty was ‘one of our worst-designed and most damaging of all taxes’. Its design meant large ‘jumps’ in tax for even small increases in the amount paid for a home.

He said this had been a burden on low- and middle-income homebuyers and a deterrent to purchases.

‘In future each rate will only apply to the part of the property price that falls within that band – like income tax,’ the chancellor said.

This would cut the duty for all but homes worth more than £937,000.

‘If you buy an averagely priced home of £275,000, you will pay £4,500 less in tax,’ Osborne said. The changes represented a tax cut of £800m a year.

The changes take effect from midnight tonight, and will also apply in Scotland until the Scottish Government’s own stamp duty regime comes into effect next April.

Responding to the announcement, Grainia Long, chief executive of the Chartered Institute of Housing, welcomed the reforms, saying the stamp duty system had been ‘very badly designed and as a result has been distorting house prices for many years’.

But she added that the changes should be the first in a broader review of the way in which property is taxed.

This should include exempting homeowners in receipt of Pension Credit from stamp duty to encourage them to move to smaller homes so freeing larger ones for families. 

The Home Owners Alliance, a pressure group lobbying for the interests of buyers, also welcomed the change saying it would stop prices clustering around the ‘arbitrary’ stamp duty thresholds.

But chief executive Paula Higgins added: ‘We think the chancellor missed a trick to really target low- and middle-income families aspiring to own a home with an exemption from stamp duty for first time buyers.’

There was also support from the Conveyancing Association, whose chair Eddie Goldsmith said: ‘Stamp duty is one of the forgotten costs of the home buying process and can be a major barrier to a purchase reaching completion.’

He said the reform would ‘help keep the market buoyant and give more buyers the chance of owning their first home’.

New stamp duty rates

Purchase price of properties, and the new rates paid on the part of the property price within each tax band

£                                          %
0 - 125,000                           0
125,001 - 250,000                2
250,001 - 925,000                5
925,001 - 1,500,000           10
1,500,001 and over            12

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