CHANCELLOR George Osborne announced a complete reform of stamp duty during today’s Autumn Statement, scrapping the “damaging” slab rate in favour a progressive system that will deliver savings for 98% of home buyers.
The new system, which will operate in a similar way to income, will only apply to residential properties with the commercial stamp duty tax system remaining unchanged.
Geraint Jones, tax partner at BKL Tax, said the move is a “welcome revision to what was a fundamentally flawed tax regime.”
Described by Osborne as” one of our worst-designed and most damaging of all taxes”, the slab system resulted in big spikes in tax when house values creep into a higher band. For instance, a property worth £250,000 would attract SDLT of £2,500, while a house worth £1 more would result in SDLT of £7,500.
Under the progressive system, there will be no stamp duty land tax on the first £125,000, while there will be SDLT of 2% up to £250,000, 5% up to £925,000, 10% up to £1.5m and 12% on everything above.
“The winners are those in the lower and middles parts of the market, where the effect will be to reduce substantially the amount of tax paid. This potentially will free up the market for first time buyers and those wanting to trade up from their own first time homes,” said Charles Beer, managing director at Alvarez & Marsal Taxand.
The changes to stamp duty become effective from midnight tonight and represent a tax cut of £800m.
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