An overhaul to the stamp duty system is set to benefit landlords, with changes announced in the autumn statement set to come into effect from midnight tonight.
Stamp duty is now to be applied like income tax as opposed to the previous ‘slab structure.’ This had previously meant that there was a sizeable jump in the tax bill when buyers crossed certain thresholds, meaning that prices often hovered just below certain limits. For example, a home which cost £249,000 would come with a tax bill of £2,490 at a rate of 1 per cent, whilst a property costing £250,001 would attract a 3 per cent rate, and a bill just exceeding £7,500.
However under the new rules, announced by Chancellor George Osborne, there will be no tax on purchases up to £125,000 as before. After that, there will be a 2 per cent tax rate on only the part of the purchase between £125,000 and £250,000. The rate then climbs to 5 per cent for any part between £250,001 and £925,000 before reaching 10 per cent for purchases between £925,001 and £1.5m. Exceeding £1.5m the rate will be 12 per cent.
For example on a £350,000 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 £100,000 (£5,000), a total of £7,500. Under the old system the stamp duty bill would have been £10,500 (3% of the whole £350,000).
It is envisaged that with the new system, the property market will be freed up around the £250,000 mark and buying activity is likely to be stimulated outside Greater London. There is liable to be a 57 per cent saving for the average property in England and Wales, amounting to around £4602.
Greater London will also benefit with an 26 percent average saving of £4,250.
Only Central London will show an increase, with average stamp duty charges rising by £37,883, which marks a 43 per cent increase. However, this is due to the abundance of properties falling into the top rate and pushing the average up.
With many buy to let investment properties at around the £250-300,000 mark, the new system should enable investors to budget more accurately and put the saving towards refurbishment.