Changes to Stamp Duty Land Tax

George Osborne revealed in his Autumn Statement to the House of Commons that he was reforming the way Stamp Duty was paid on property purchases. He hopes that this will benefit 98% of property buyers.

The old system worked on a tiered basis. As a result, the rate at which Stamp Duty was payable applied to the whole of the price. If the purchase price did not exceed £125,000 there was no Stamp Duty to pay. However, if the property cost say £125,001, Stamp Duty at the rate of 1% was paid on the whole price, working out at a rather large £1,250. If the purchase price was over £250,000, Stamp Duty was paid at the rate of 3% of the total price. For a property purchased above £500,000 (but not exceeding £1 million), the rate of Stamp Duty was 4% of the total price.

Under the new system buyers will now only pay Stamp Duty on the portion of the price that is within a certain tax bracket. Like under the previous rules, if the purchase price does not exceed £125,000, there is no tax to pay. However, a new 2% rate is charged on the next £125,000 of the price. If the purchase price exceeds £250,000, you will then be charged 5% on that part which exceeds £250,000, up until £925,000.

For example, if you are buying a property for £275,000, no stamp duty would be payable on the first £125,000. £2,500 would then be payable on the next £125,000 (£125,000 x 2%) and £1,250 would be payable on the final £25,000 (£25,000 x 5%). Therefore the total Stamp Duty payable would be £3,750. If you had purchased the same property under the old rules the tax would have been much higher, namely £8,250 (£275,000 x 3%).

Example on a purchase price of £275,000
First £125,000
Tax Free £125,001 – £250,000
2% Tax Rate £250,000 +
5% Tax Rate
£125,000
No Tax to pay Next £125,000
£2,500 tax Last £25,000
£1,250 tax

In summary, there will be no tax to pay on the first £125,000 of the purchase price. You pay 2% of the purchase price on the portion between £125,000 and £250,000 and 5% on the portion above £250,000 up to £925,000. Higher rates apply thereafter.

The new Stamp Duty rates are shown in the table below:
Purchase price of property Percentage paid on the part of the property price which falls within the tax band
£0 – £125,000 0%
£125,001 – £250,000 2%
£250,001 – £925,000 5%
£925,001 – £1,500,000 10%
£1,500,000 and over 12%

If you would like to discuss the changes with one of our specialist conveyancing solicitors at Kiteleys or would like to receive an estimate for conveyancing fees please contact our team at info@kiteleys.co.uk or call 01202 708634.