Chancellor George Osborne has announced some significant reforms to stamp duty as part of his Autumn Statement, which could mean substantial savings for many of those thinking about making a move. Anyone who is already in the process of buying their next home should be able to choose between operating on the new system or sticking with the old one, but buyers who are just getting started with their search will be working with the reforms.
Under the old system, the amount of stamp duty that people paid would jump up as property prices increased. Someone buying a property for £250,000 would be charged 1% of the property’s value, or £2500. If the property cost just a pound more, they would be charged 3% for the whole property, costing them £5000.
In the future, stamp duty will be set according to a graduated system that works rather like income tax. Properties costing up to £250,000 will be exempt from stamp duty, which will be calculated as a percentage of the property price that falls within specific bands above this. Buyers will be charged 2% of the value of the property between £125,000 and £250,000, 5% of the portion between £250,000 and £925,000, 10% on the portion between £925,000 and £1.5 million, and 12% on everything above this.
For a buyer purchasing the average family home at £275,000, this could result in significant savings. Under the old rules, they would need to pay £8250 in stamp duty. Under the new system, there will be no charge for the first £125,000. A duty of 2% will need to be paid on the next £125,000 of the property, up to £250,000, with a charge of 5% for the remaining £25,000 of the property that falls into the next band. This will add up to £3750, a saving of £4500.
The only buyers who should end up paying more under the new rules are those buying properties costing more than £937,000, so the reforms will be good news for most people. According to the Chancellor, 98% of homeowners should now be paying less when they are moving house.