Beginning 4th December, the new rates of stamp duty will only apply to the amount of the purchase price that falls within the particular duty band – making it more like income tax.
Before this, stamp duty charged higher rates on the whole of the purchase price. This meant that if a house fell into a particular band the entire cost was taxed at the related rate - meaning that once you had crossed a threshold there was a big jump in the tax bill.
- Under the old rules, if you bought a house for £185,000, you would have had to pay 1% tax on the full amount – a total of £1,850.
- Under the new rules, for the same property you’ll pay nothing on the first £125,000 and 2% on the remaining £60,000. This works out as £1,200, a saving of £650.
Now, the Treasury says that around 98% of households or anyone buying a house costing less than £937,000 will benefit from reduced stamp duty.
As before, there will still be no tax on house purchases prices up to £125,000
If you pay over £125,000, there will be several price bands:
- £125,001 to £250,000 – 2%
- £250,001 to £925,000 – 5%
- £925,001 to £1.5m – 10%
- Above £1.5m – 12%
However, this means that if you buy a house for £2,100,000, instead of paying £147,000 tax under the old rules, you will now be paying £165,750.
These changes will apply across the UK until April. At this time, homebuyers in Scotland will see the Scottish Parliament’s own reforms of tax take place.
If you are unsure as to how the stamp duty changes will affect you, HMRC has an online calculator that can help you to work out how much you have to pay.