The Impact of the Change in Stamp Duty

Posted by on Dec 7, 2014 in Guides, News Alerts | No Comments

The major announcement in the Autumn Statement was the change in Stamp Duty on a residential property.  This guide illustrates the impact this will have.

For an individual buying a property under the previous rules, the Stamp Duty was levied a single rate based on the purchase price of the property, as follows:

Amount

%

Up to £125,000

0%

Over £125,000 to £250,000

1%

Over £250,000 to £500,000

3%

Over £500,000 to £1,000,000

4%

Over £1,000,000 to £2,000,000

5%

Over £2,000,000

7%

Now, Stamp Duty is charged at a marginal rate with the total tax being sum of the parts of the property price within each tax band at each rate, in the same manner as Income Tax, with the following rates:

Amount

%

£0 – £125,000

0%

£125,000 – £250,000

2%

£250,001 – £925,000

5%

£925,0001 – £1,500,000

10%

£1,500,001 +

12%

As a result, if you now purchase a property for £275,000, the Stamp Duty would be calculated as follows:

Amount

%

Stamp Duty

£125,000.00

0%

£0.00

£125,000.00

2%

£2,500.00

£25,000.00

5%

£1,250.00

£275,000.00

 

£3,750.00

Under the old rules, Stamp Duty would have been calculated at 3% of £275,000.00 totalling £8,250.00.  As a result there is a saving of £4,500.00 under the new method.

Similarly, for a £600,000 property, the Stamp Duty would be calculated as follows:

Amount

%

Stamp Duty

£125,000.00

0%

£0.00

£125,000.00

2%

£2,500.00

£350,000.00

5%

£17,500.00

£600,000.00

 

£20,000.00

Under the old rules, Stamp Duty would have been calculated at 4% of £600,000.00 totalling £24,000.00.  As a result there is a saving of £4,000.00 under the new method.

However, for £1,200,000 property, the Stamp Duty would be calculated as follows:

Amount

%

Stamp Duty

£125,000.00

0%

£0.00

£125,000.00

2%

£2,500.00

£675,000.00

5%

£33,750.00

£275,000.00

10%

£27,500.00

£1,200,000.00

 

£63,750.00

Under the old rules, Stamp Duty would have been calculated at 5% of £1,200,000.00 totalling £60,000.00.  As a result there is an increase of £3,750.00 under the new method.

The ‘tipping point’ is £937,500 where the Stamp Duty calculates through to £37,500 under both the old and new method.

For residential leases, if the cost is more than £125,000, Stamp Duty will continue to be charged at 1% on the amount above the £125,000 threshold.

Likewise, there is no change to the Stamp Duty levied on non-residential and mixed-use properties which is based on the purchase price and lease premium or transfer value at the following rates:

Amount

%

To £150,000 – annual rent < £1,000

0%

To £150,000 – annual rent =>   £1,000

1%

Over £150,000 to £250,000

1%

Over £250,000 to £500,000

3%

Over £500,000

4%

There is no change to the payment process with a Stamp Duty return submitted and the tax paid within thirty days of completing on your property.  Although this is the responsibility of the purchaser, a solicitor or conveyancer usual handles this.

A Stamp Duty return is required even if you are not due to pay any tax unless the property costs less than £40,000.

On receipt of a valid Stamp Duty return, the HMRC will issue a certificate which allows the title of your to the property to be registered at the Land Registry or the Registers of Scotland.

If you would like more detailed guidance on Stamp Duty or the impact of any of the Autumn Statement announcements or have a specific question, please contact welcome@cooperfaure.co.uk and we would be pleased to advise you.