Chancellor George Osborne’s stamp duty reforms, announced on Wednesday (December 3rd) as part of the autumn statement, have been widely praised, with the property market likely to be boosted by the positive move.
Mr Osborne sought to move away from ‘archaic’ old stamp duty bands and announced a new way of calculating the fee. It will mean buyers and investors alike paying far less than they have in the past thanks to a more dynamic structure.
The progressive new charges move away from the block fee that was calculated on the entire value of a home, and instead replaces this with a system where only the portion above each threshold is chargeable.
The new bands see property up to the value of £125,000 charged zero per cent, two per cent for up to £250,000, five per cent for up to £925,000, ten per cent up to £1.5 million and 12 per cent above £1.5 million.
New proportional charging, however, means that someone who buys a property at a cost of £300,000 for example, could save themselves £4,000 on the cost of their stamp duty.
Whereas in the past they would have paid a flat £9,000 on the three per cent band, the new charges would break down as follows: zero per cent on the first £125,000, two per cent on £125,000 to £250,000 (£2,500) and five per cent on the remaining £50,000 (£2,500), giving them a total of £5,000.
The only people who will end up paying more than in the past will be those buying a home at a cost of more than £937,000. But for the market as a whole, the change is good news.
“The abolition of the archaic slab system will take the sting out of the tail for thousands of buyers on the lower rungs of the ladder. The new graduated system should help brighten the UK housing recovery in regions outside of London, where property prices are still battling back to pre-recession levels,” said Peter Rollings, chief executive of Marsh & Parsons.
As well as directly affecting buyers, the reforms will also have a knock-on effect for the rest of the market as well. Positives include the fact that those selling with capital gains in mind will no longer face discounting their properties to make sure they come in at a lower band to entice buyers.
It’s also likely that more buyers and sellers will come to market, allowing the property sector to grow across the next year and beyond.