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SDLT Changes: How Will It Affect You?

Posted on December 3rd 2014 by

From 4 December 2014 (effective from midnight tonight) Stamp Duty Land Tax (SDLT) rates for residential properties will only apply to the part of the property price that falls within each band.

It was announced in today’s Autumn Statement that the old ‘slab’ system will be replaced so home buyers pay the tax at gradually increasing rates on tranches of the total value of the property – similar to income tax – rather than a single rate on the whole transaction, eliminating the steep jump in tax paid when properties cross, for example, the £250,000 threshold.

Buyers will pay no stamp duty on the first £120,000, 2% on the portion of the property value between £120,000 and £250,000, 5% on the rest up to £925,000, 10% up to £1.5 million and 12% on anything above that.

Unfortunately these changes do not apply to commercial or mixed use property which is not residential for SDLT purposes.

Example 1 

Tax due on average house price in the South West (£236,661) based on SDLT rules before 4 December 2014:

Purchase price (£)

Percentage rate (%)

Total SDLT due (£)

236,661

1

2,366

Tax due on average house price in the South West (£236,661) based on SDLT rules from 4 December 2014:

Purchase price bands (£)

Amount (£) x Percentage

Amount of SDLT due (£)

Up to 125,000

125,000 x 0%

0

Above 125,000 and up to 250,000

111,661 x 2%

2,233

Above 250,000 and up to 925,000

0 x 5%

0

Above 925,000 and up to 1,500,000

0 x 10%

0

Above 1,500,000+

0 x 12%

0

 

Total SDLT due

2,233

Under the new rules this is a saving of £133 when compared with the amount of SDLT due under the old rules.

Example 2

Tax due on £450,000 property based on SDLT rules before 4 December 2014:

Purchase price (£)

Percentage rate (%)

Total SDLT due (£)

450,000

3

13,500

Tax due on £450,000 property based on SDLT rules from 4 December 2014:

Purchase price bands (£)

Amount (£) x Percentage

Amount of SDLT due (£)

Up to 125,000

125,000 x 0%

0

Above 125,000 and up to 250,000

125,000 x 2%

2,500

Above 250,000 and up to 925,000

200,000 x 5%

10,000

Above 925,000 and up to 1,500,000

0 x 10%

0

Above 1,500,000+

0 x 12%

0

 

Total SDLT due

12,500

Under the new rules this is a saving of £1,000 when compared with the amount of SDLT due under the old rules.

Key points to note:

  • If the purchase of a property was completed on or before 3 December but the SDLT return has not yet been filed the rates under the old rules will apply.
  • Transitional rules will allow buyers who have exchanged contracts (or in Scotland concluded missives) before 4 December to choose whether to pay SDLT under the old or new rules.
  • The method of paying SDLT has not changed, a SDLT return will still need to be submitted even if there is no tax due (unless the property is less than £40,000).

Please refer to the following Government fact sheet for further details.

Stamp Duty Land Tax calculator

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EmmaP

EmmaP says: December 22nd, 2014 at 10:17 am

This change has got to be a good thing for house sales and is a much fairer system that should hopefully allow a lot more home owners to continue to climb the housing ladder.
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