A stamp duty cut was announced today by Chancellor Kwasi Kwarteng to tackle a major hurdle for some home buyers.
The threshold at which stamp duty kicks in will be immediately and permanently doubled from £125,000 to £250,000, but the rates will not change.
For someone buying a £270,000 average home this will mean that their bill is reduced from £3,500 to £1,000.
First-time buyers will see their exemption level raised from £300,000 to £425,000 and pay no stamp duty up to that level.
However, many home buyers may be disappointed as the decision to change the threshold but not the rates will only save most £2,500.
|Band||Existing residential SDLT rates||Additional rates for landlords|
|£0 – £125k||0%||3%|
|£125,001 – £250k||2%||5%|
|£250,001 – £925k||5%||8%|
|£925,001 – £1.5m||10%||13%|
|* No stamp duty is paid on property transactions costing less than £40,000 as these are considered low value and not reported to HMRC|
The move in the so-called mini-Budget is a cut to one of Britain’s least favourite taxes that has a far greater impact on some buyers than others.
While first-time buyers get a stamp duty exemption and those buying an average UK £270,000 home face bills of about £3,500, people buying family homes in more expensive areas can face bills of tens of thousands of pounds.
How much stamp duty would you pay now?
Average £270,000 home: £1,000 – saving £2,500
£350,000 home: £7,500 – saving £2,500
£450,000 home: £10,000 – saving £2,500
£500,000 home: £12,500 – saving £2,500
£750,000 home: £25,000 – saving £2,500
£1,000,000 home: £41,250 – saving £2,500
How stamp duty works
Stamp duty is charged on the purchase price of a home and levelled at different rates above thresholds.
First-time buyers had a stamp duty exemption up to £300,000, which has now been raised to £425,000.
Previously, stamp duty kicked in above a threshold of £125,000 at 2 per cent and then stepped up to 5 per cent above £250,000
Now the first £250,000 is tax-free and amounts above that are charged at 5 per cent until the 10 per cent threshold at £925,000.
The last major permanent stamp duty reform by George Osborne saw bills eased for some home buyers further down the price ladder and cliff edges removed, but higher charges for those buying expensive homes.
Stamp duty bills still remain substantial for those buyers under Kwasi Kwarteng’s cut, but they will see a reduction of £2,500.
In April 2016, stamp duty on buy-to-let and other additional properties was reformed, with the addition of a new 3 per cent surcharge on all rates. This will remain under the new higher threshold system.
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