Stamp Duty Land Tax Reforms

Stamp Duty Land Tax Reforms

Stamp Duty Land Tax reforms

Last December’s Autumn Statement included a surprise shake up to the Stamp Duty Land Tax (SDLT) regime for residential property only.  

What has changed?

Under the old rules, SDLT was payable at a single rate, based on the entire property price.  The amount of SDLT payable corresponded with whichever bracket the property price fell into:

Price                             

SDLT                      

Up to £125,000
Zero
Over £125,000 to £250,000
1%
Over £250,000 to £500,000 3%
Over £500,000 to £1 million
4%
Over £1 million to £2 million       

5%
Over £2 million 7%

 

The old system was unfair, as the bands were very wide and a small adjustment to the purchase price could result in significant fluctuations in the amount of SDLT payable.  For example, if we consider a property with a purchase price of £249,999, SDLT under the old regime would have amounted to £2,500.  However, if the price of the same property was increased by a mere £1 to £250,000, the SDLT for the purchaser would increase significantly, to £7,500.

Under the new rules and rates, SDLT is payable at a marginal rate, meaning that tax will still be payable on the purchase price, but it will be based on the proportion of the purchase price that falls within each rate band:

Price                                      SDLT                         
Up to £125,000  Zero
Over £125,000 to £250,000                            
2%
Over £250,000 to £925,000  5%
Over £925,000 to £1.5 million   10%
Over £1.5 million 12%

 

If we use the same example of a purchaser buying a property worth £250,000 under the new rules, SDLT will be £2,500.

This change took effect from 4 December 2014.

Points to note

The new system is designed to be much fairer to purchasers of residential property.  But there is a sting in the tail.  Firstly, new higher rates of 10% and 12% were introduced for properties with a purchase price exceeding £925,000.

Furthermore, the old banding system remains in place for the purchase of commercial property, meaning only those investing in residential properties will benefit from the new regime.

If you would like to discuss any of these matters or talk to us about your tax affairs in general, please contact our Tax Partner, Chris Barrington on the details below:

Chris Barrington
email: chris.barrington@jsllp.co.uk
telephone: 01942 292505

 

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