Stamp duty reform announced

Landlords looking to expand their rental portfolio will benefit from an overhaul to the stamp duty system announced in the autumn statement.

Anyone completing a property purchase after 00.01 on 4 December will face a new set of rules which will benefit most people.

Previously stamp duty worked on a “slab structure”. This meant that if a home falls into a particular band the entire cost of it is taxed at the related rate.

This meant that there was a big jump in the tax bill when you crossed a threshold. For example, a home costing £249,000 attracted a bill of £2,490 (1% rate), while one costing £250,001 attracted a bill of just over £7,500 (3%). Mortgage lenders and estate agents have long argued that this meant house prices bunched just below thresholds.

Chancellor George Osborne announced that the slab structure would be scrapped and from now on stamp duty would be applied like income tax.

Under the new rules there will still be no tax on purchases up to £125,000. Above that there will be several bands:

• Between £125,001 and £250,000 the rate will be 2%
• Between £250,001 and £925,000 the rate will be 5%
• Between £925,001 and £1.5m the rate will be 10%
• Above £1.5m the rate will be 12%.

Under the new system on a £300,000 house purchase there would be no tax to pay on the first £125,000, then 2% on the next £125,000 (£2,500) and 5% on the last £50,000 (£2,500), a total of £5,000. Under the old system the stamp duty bill would have been £9,000 (3% of £300,000).

http://www.landlordtoday.co.uk/news_features/Stamp-duty-reform-announced