In the budget George Osbourne fundamentally changed the way Stamp Duty is calculated and charged. If you’re buying or selling a property make sure you understand these changes as they can make or break your house purchase. The good news is that the changes will save money for most of us in Kent, Surrey and the South East, those living in London will feel the pinch though.
So here is how it works, bear with me as there are lots of figures here.
Stamp Duty – The Maths
From 4 December 2014 Stamp Duty is calculated on the portion of the property sales price that falls into each band. You only pay the rate of tax for the portion of the house price that falls in each band. So you pay 0% for all of the sale price that is below £125 000, 2% for the amount that falls between £125 001 and £250 000, for the sale price between £250 001 and £925 000 is charged at 5% and so on, see the table below for more. So not only have the rates changed but you only pay tax on the portion of the property sale in each band. Simples!
Stamp Duty Tax Rates and Bands
Worked Example
It is probably easier if we work through an example. Let’s say you have just agreed to buy a loverly 4-bedroom house in Canterbury, Kent for £450 000 your Stamp Duty will be calculated as follows. For the first portion up to £125 000 there will be no Stamp Duty to pay, for the portion falling between £125 001 and £250 000 the fee will be £2500 and the final £200 000 will incur £10 000. This means that the Treasury will charge you £12 500 for a house purchase of £450 000.
Now that is a lot of money but the good news is that under the old scheme we would have been charged 3% on the whole house price, which would have meant a stamp duty bill of totalling £13 500. So most of us moving house in Kent or the South East will be better off under the new regime, although it may take a while for us to fly get our head around the new tax law. In fact the Government has said that nobody buying a house under £925 000 will be out of pocket.
For more information regarding stamp duty on house purchases check out:
https://www.gov.uk/stamp-duty-land-tax/residential-property-rates
There is also a handy tool here to calculate the stamp duty land tax, all you have to do is enter the price of your new home and voila.
http://www.hmrc.gov.uk/tools/sdlt/land-and-property.htm
