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Charles Church

Stamp Duty rate cut a boost for homebuyers

26 March 2019

Stamp duty rates have been cut for an estimated 98% of people. Find out how much you could save when buying a new home.

In his Autumn Statement Chancellor, George Osborne announced a change in the stamp duty rates for homebuyers. New cuts mean a reduction in costs for an estimated 98% of buyers. The good news continues as this will take effect from 4th December 2014 so if you’re buying a home you can benefit immediately from the huge savings.

In Scotland the new rates will apply until 1 April 2015, when the Land and Buildings Transaction Tax replaces stamp duty in Scotland.

As a homebuyer you will no longer pay a stamp duty rate on the whole purchase price, only the part of the property price that falls within each band - similar to the structure of Income Tax. The stamp duty rate will now rise steadily meaning distortions in the market will be avoided. For example, under the current system, the stamp duty on buying a £250,000 home would be 1% meaning a sum of £2,500 but a transaction for £250,001 would move into the higher 3% tax bracket and incur a stamp duty payment of £7,500. The new stamp duty rate means £250,000 will no longer be a limiting threshold.

So what does this mean in real terms?
If you’re buying a home of around £350,000, 0% will be paid on the first £125,000, with 2% levied on the amount between £125-250,000 and 5% on the £100,000 above that amount. This means an overall payment of £7,500 instead of £10,500 under the current system (at a tax rate of 3%) – a substantial saving of £3,000.

If you’ve already exchanged contracts but complete on or after 4th December you will be able to choose whether to pay stamp duty under the old system or with the new rules applied to your purchase – with the huge savings we’re confident there won’t be many who stick to the old rates.

Please see the tables below for a summary of effective tax rates and what this will mean for properties of different prices.

New stamp duty bands

Property value Tax rate charged on part of property price within each band
£0 - 125k 0%
£125 - 250k 2%
£250 - 925k 5%
£925k - £1.5m 10%
£1.5m + 12%

Effective tax rates and changes in stamp duty due by property value:

Property value (£) Effective tax rate Change in stamp duty due (£)
Before 4th December From 4th December
100,000 0 0 0
150,000 1.0 0.3 -1,000
200,000 1.0 0.8 -500
250,000 1.0 1.0 0
275,000 3.0 1.4 -4,500
300,000 3.0 1.7 -4,000
350,000 3.0 2.1 -3,000
400,000 3.0 2.8 -2,000
450,000 3.0 2.8
500,000 3.0 3.0 0
600,000 4.0 3.3 -4,000
700,000 4.0 3.6 -3,000
800,000 4.0 3.8 -2,000

The new stamp duty rules

The new rules start on 4 December 2014 – but if you’ve already exchanged on a property you’ll have a choice about whether to use the old or new rules.

Completing your sale on and after 4 December 2014
If you exchange and complete (or in Scotland, settle) your home purchase on or after 4 December you will pay stamp duty under the new rules.

Completed your sale before the 4 December 2014
If you completed on the purchase of your property on or before 3 December 2014, but have not yet filed your stamp duty return, you still have to pay stamp duty under the old rules.

Exchanged on your contract before 4 December 2014
If you exchanged contracts (or in Scotland, concluded missives) before 4 December but complete on or after that date you’ll be able to choose whether the old or new rules apply. In the majority of cases you’ll pay less tax under the new rules.

Stamp duty calculator
HMRC has an online calculator to help you work out how much stamp duty you will have to pay.

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