n his Autumn statement, the Chancellor announced a number of reforms on how stamp duty rates are to be applied to residential properties. This will have an important impact on the level of Stamp Duty Land Tax to be paid by purchasers of such properties. HMRC have stated the new reforms will be cut for 98% of buyers.
Previously, a single rate of SDLT was applied to the entire purchase price. However, from 4th December 2014 onwards, the rate of tax will be applied to each portion of the purchase price which falls within each band as follows:
£0 - £125,000
Over £125,000 and up to £250,000
Over £250,000 and up to £925,000
Over £925,000 and up to £1.5m
Rate of SDLT Payable
For example, where a property has been purchased for the sum of £270,000, SDLT will be applied in the following way:
0% on the first £125,000 = £0 SDLT
2% on the next £125,000 = £2500 SDLT
5% on the final £20,000 = £1000 SDLT
Total SDLT due: £3500 (a saving of £4600)
The new rules come into force from 4th December 2014 and will significantly reduce the amount of SDLT paid by house purchasers. However, if contracts have been exchanged in a transaction prior to this date but completion has not yet taken place, clients will have the choice of which rules to use. Any sales completed on either 3rdDecember 2014 or before where SDLT has not yet been paid, will remain governed by the old rules.
The new reforms do not apply to non-residential properties or new leases.
For further information or advice please contact Faye Dunwoody on 028 9023 2303.