residential conveyancing

Changes to Stamp Duty land Tax 2014

In his Autumn statement on the 3rd December 2014, the Chancellor announced a sweeping reform to Stamp Duty Land Tax (SDLT), discarding the "badly designed" slab tax. The new system is expected to deliver savings for 98% of home buyers.

What is SDLT?

You have to pay Stamp Duty Land Tax (SDLT) when you buy a property in the UK over a certain price.

This is charged on the purchases of all houses, flats and other land and buildings.

The SDLT rate depends on the purchase price of the property and whether the property is residential. SDLT may also be due if you lease a property.

The old “slab” system

Before the 4th December 2014, SDLT was charged as a single percentage of the property price.

This meant the amount owed jumped significantly at each threshold level. Stamp duty therefore worked on a "slab" basis with the percentages tax applied to the whole of the purchase price within that banding.

For example, a house priced at £250,000 would attract an SDLT of £2,500, but one of £250,001 would be liable to SDLT of £7,500. A house priced at £500,000 would be liable for £15,000, but a purchase of £500,001 would be liable for £20,000.

The result was a distorting effect on the housing market, because a house is very difficult to sell at prices just above each threshold, for example, £251,000.

The new system

The new system applies a graduated rate, working in a similar way to income tax and applies from midnight on 3rd December 2014.

The following rates of stamp duty will be payable on residential properties from 4th December 2014:

0% on properties up to £125,000
2% on properties between £125,001 and £250,000
5% on properties between £250,001 and £925,000
10% on properties between £925,001 and £1.5m
12% on properties in excess of £1.5m

Exchanged contracts but not completed yet?

Where contracts have been exchanged on or before 3rd December 2014, and the transaction is completed on 4th December 2014 or later, you can choose whether you follow the new or old rules.

Different rates apply in Scotland from 1st April 2015 when the Land and Buildings Transaction Tax (LBTT) replaces SDLT.

Expected impact

The Government hope this will help young professionals and families get on the property ladder by reducing the burden of stamp duty.

However, those people buying the higher priced properties will be paying much more. If you are buying a home at £2m you will pay £50,000 more under the new policy.

The impact can be shown as follows:

Figures to show the difference between the old and new Stamp Duty Tax payable on comparable properties

Need more information?

If you need more information about how the changes in Stamp Duty will affect you please contact Tim Langford and Michelle Layton on 0121 705 7571 (Solihull office), or Asia Bi on 01564 779393 (Dorridge office).

This article is for general information purposes only. It does not constitute technical, financial, legal advice or any other type of professional advice and is no substitute for specific advice based on your individual circumstances. We do not accept responsibility or liability for any actions taken based on the information in this article. For more information, please click here.