After the Chancellor’s Autumn Statement, I spoke to a homebuyer who had a personal experience and showed how the old Stamp Duty Land Tax band system affects the decisions sellers and buyers make in the property market.
They own a property that is valued at around £120,000 and is on the border between no stamp duty and the old, lower duty band of 1%. When deciding on home improvements, in this case a conservatory costing about £8,000, they had to seriously consider how much the stamp duty would cost them if the value of their house went over the threshold ie £128,000 which was above the old £125,000 threshold and would have meant a buyer now had to pay 1% on the entire sales price.
The Chancellor unveiled a new Stamp Duty system that removed many of the artificial thresholds and now allows stamp duty to be paid on a graded scale. This means it is charged at a different rate depending on how much of the sales price falls into each of the new stamp duty rate bands. There is no stamp duty paid on the first £125,000 of a sale price, 2% above £125,000 and up to £250,000, 5% on the portion above £250,000 and up to £925,000, 10% above £925,000 and up to 1.5 million and 12% on everything over £1.5 million.
So now, when this home owner sells, instead of paying 1% on the whole selling price will only pay duty of 2% on everything over £125,000. This means the seller may be able to do all the improvements to their house and still be able to get a fair price.
“It will be interesting to see how the change to stamp duty in the Chancellor’s Autumn Statement affects the property market in the coming months.
Opinion seems to be that this new ‘gradual band tax’ is a system generally welcomed by property agents. I’ve read that the new system could benefit up to 98% of residential property sales. However, without artificial stamp duty barriers, could this cause some homeowners to review the price of their property and increase them?
Only time will tell as to whether this will revolutionise the housing market but I am cautiously optimistic