Reform of Stamp Duty Land Tax

  • December 05, 2014
  • By Hunters Law

In his Autumn Statement, on 3rd December 2014, the Chancellor announced significant changes to the Stamp Duty Land Tax (SDLT) regime for the purchase of residential property in England & Wales. The changes apply to every purchase of residential property in England and Wales with effect from Thursday 4th December 2014.

The reforms change the way SDLT is charged from the previous ‘slab system’ to a graded one.  If you are in the process of buying a property now, your position will depend on the status of the purchase at midnight on 3rd December 2014:

1. If you had already exchanged contracts on or before midnight on 3rd December 2014:

You will need to know the amount of SDLT that you were going to have to pay under the old rules and also the amount of SDLT that the new rules would require you to pay. The HMRC Guidance states that “you can choose whether to use the old or the new rules”. The new rules are likely to lower your SDLT bill (or leave it the same) if you had exchanged contracts to buy a residential property for a price of £937,500 or less.

2. If you exchange contracts after midnight on 3rd December 2014:

Quite simply, the new rates will apply. You will have to pay SDLT at the new rates upon the completion of your purchase.

The new rates are:

  • Purchase price up to £125,000 – zero SDLT
  • £125,000-£250,000 – 2%
  • £250,000-£925,000 – 5%
  • £925,000-£1.5million – 10%
  • Over £1.5million – 12%

The HMRC online calculator will tell you the precise amount of SDLT payable on completion of your purchase.

Some examples:

  • A buyer at a price of £4m will have their SDLT bill increase from £280,000 to £393,750 – so must find an extra £113,750.
  • A buyer at a price of £300,000 will have their SDLT bill reduce from £9,000 to £5,000 – so will have a saving of £4,000.
  • Interestingly, a buyer at precisely £500,000 will pay precisely the same SDLT (£15,000) under the old and the new rules.

This note gives a very brief overview and does not relate to purchases by ‘non-natural persons’, the annual tax on enveloped dwellings, or SDLT payable on the purchase of non-residential or mixed-use property.

For more information on the new SDLT regime please contact the partner at Hunters having responsibility for your legal matters or, for new enquiries, a member of our Residential Property Team.

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