Will the Chancellor’s stamp duty reforms that came into force at midnight be a shot in the arm to the property market? John Follwell, a director at Stone’s Follwells estate agents, says the reforms are long overdue. Here he explains the implications for house buyers in Stone…
The Chancellor, George Osborne, announced major stamp duty reforms yesterday (3rd December) as part of his Autumn Statement, claiming that from midnight stamp duty will be cut for 98% of homebuyers who pay it.
Reforms that will see the average house buyer in Stone saving almost £750.
SDLT – or Stamp Duty Land Tax, to give its full name – is paid to the Treasury on every property purchase in excess of £125,000. The issue with the system before today was not so much the rate at which it was charged but the slab structure applied to the charging process. This was particularly problematic near the thresholds at which the SDLT rate changed.
For example, if you purchased a property for £249,000 you would pay 1% of the purchase price in tax, meaning a bill of £2,490. However, if you purchased that property for £250,001 you would pay 3% of the entire purchase price – giving a hefty tax bill of £7,500. This often created a build-up of properties priced at or just below each of the SDLT thresholds.
From midnight, SDLT is now charged at a graduated rate, similar to income tax, meaning that the rates of tax charged will only apply to the part of the property price that falls into each band. The different price bands and rates charged are as follows:
No tax will be charged on anything up to £125,000
2% between £125,001 and £250,000
5% between £250,001 and £925,000
10% between £925,001 and £1,500,000
12% anything above £1,500,000
So what does this mean in real terms around Stone? Well, according to Rightmove, using data from the Land Registry, the average price of property sold in Stone in the last 12 months was £175,097. Until today, that would have resulted in an SDLT bill of £1750.97. Under the new system, that tax bill would be £1001.94, saving the average buyer £749.03.
Different parts of the market will clearly be affected in different ways. A house purchase at £250,000 will pay the same as before, yet a purchase at £300,000 will pay a colossal £4,000 less under the new system.
So what effect will this have on the property market? Property expert Henry Pryor said on Twitter: “Average home buyer will save £4,500 after Stamp Duty changes. Question is, will this simply be added to their budget and raise prices?” Only time will tell but I feel that reform to SDLT is long overdue. In 2013-2014 the Treasury took £6.45 billion from SDLT, an increase of 74% on the 2003-2004 figure, despite fewer sales. Isn’t it about time something was given back?
This is definitely good news for the property market.
I have had the pleasure this afternoon of contacting one of our purchasers who have exchanged contracts but don’t complete until this Friday, to tell them that they will save over £1,150 in SDLT. A very nice little gift this close to Christmas!
JOHN FOLLWELL MNAEA
www.follwells.co.uk
01785 818875
john@follwells.co.uk
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