Stamp Duty Changes
On Wednesday the Chancellor announced changes in the Autumn Statement to the Stamp Duty rates. These changes will of course affect the housing market and we thought it might be helpful to explain a little more on how these changes might affect you, if you are thinking of putting your property on the market in the near future.
Previously, with the old system, there were three major points where there were hikes in tax bills, these being when you went through the thresholds at £500,000, £1 million and £2 million. We refer to these as the cliffs below. This led to a distortion in the market at these price boundaries. The changes that were announced on Wednesday have smoothed out these changes allowing for more realistic prices without the need to try to squeeze under the bar.
As the Chancellor said, 98% of people thinking of buying will be paying less in Stamp Duty than under the previous system. The new rates and bands are listed below.
So for properties with a value up to £925,000 there is either little change or a saving in the amount of tax paid. There is then a grey area between about £935,000 and £1,100,000 where some lose a small amount and some gain a bit, this distortion being due the old cliff at £1 million. For properties above about £1,100,000, tax is increased. The only good news is that the distortion caused by the old cliff at £2 million disappears.
Moving house has always been a costly thing to do and for the higher value properties this is still the case, but the benefits of the lower tax rates at the other end of the scale should have a positive knock on effect for the more expensive houses. If sales at the lower end of the market are more buoyant as a result of lower tax bills, then more people moving will inevitably lead to sales all the way up the chain.
Two houses in Froxfield, Hampshire, one just over 1 million where the buyer has made a small saving of £2,500 under the new system. The other around £1,700,000 where, If the buyer hadn’t moved quickly and exchanged contracts by midnight on the day of the changes, the bill would have increased by around £33,000.
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