ASK THE ACCOUNTANT – a weekly guide to the world of business finance with Warings Accountants

Q. How will I be affected by the recent changes to the rates of Stamp Duty Land Tax if I move house?

A. These are generally good news for homeowners and prospective buyers.

Prior to December 4, the rules meant that property valued up to £125,000 was 0%, £125,001 to £250,000 was 1%, £250,001 to £500,000 was 3% and £500,001 to £1,000,000 was 4%. For comparative purposes, I’ve only considered properties valued up to £925,000.

So, for example, a property sold for £250,000 would attract stamp duty of £2,500 whereas a property sold for £1 more the stamp duty would be £7,500.03.

Whilst the rates of stamp duty have effectively increased, SDLT is now charged at different rates depending on the portion of the purchase price that falls within each rate band. So the new rates up to £925,000 mean the portion of the purchase price up to £125,000 is now 0%, £125,000 to £250,000 is 2% and £250,000 to £925,000 is 5%.

A property sold for £250,000 from December 4 still attracts SDLT of £2,500, but on a property sold for £1 more the new SDLT payable would be £2,500.05 – a reduction in duty payable of almost £5,000!

The change is most helpful for property sales near the £250,000 or £500,000 rate bands. For very high value properties, the new rules aren’t as attractive. So, a property being sold for £2,000,000 under the old rules would have attracted duty of £100,000, under the new rules this increases to £153,750.

For contracts exchanged on or before December 3, though, you can choose to use the old or the new rules.

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