In December 2014 the Chancellor announced a monumental change in the way Stamp Duty is calculated, resulting in savings for around 98% of homebuyers. Only people purchasing a property for more than £937,000 will pay more under the new system. The changes apply if you are buying a residential property for over £125,000.
Stamp Duty used to be calculated at successively higher rates on the whole of the purchase price. So, if you bought a house for £250,000 you would pay 1% in Stamp Duty i.e. £2500. If the price of the house was just £1 more, then the higher rate of Stamp Duty would apply to the whole of the purchase price, so that 3% of the purchase price would be payable i.e. £7500.
Under the new system, the rates of Stamp Duty are applied only to the portion of the purchase price that falls within each band. So in the example above, the higher rate would only apply to the £1 that falls into the higher rate band.
The new rates are as follows:
Purchase price of property Rate paid on part of price within each band
0% on the first £125,000 0%
Over £125,000 and up to £250,000 2%
Over £250,000 and up to £925,000 5%
Over £925,000 and up to £1,500,000 10%
Over £1,500,000 12%
It is important that your solicitor calculates the correct amount of Stamp Duty that you should pay and that the Stamp Duty return is submitted in the correct time period following completion. If you are part way through the conveyancing process, and your solicitor has already told you how much Stamp Duty you will have to pay, time should be taken to re-calculate the new amount payable as this could potentially save you thousands of pounds.
The way you pay Stamp Duty is not changing. As before, a Stamp Duty return will have to be submitted within 30 days of completion, together with the relevant tax payment. You still have to submit a return even if you are not due to pay any Stamp Duty on the purchase price of your property, unless the property costs less than £40,000.
These changes have been widely welcomed and will hopefully help save money for home buyers- especially here in the North East.