04 December 2014 , By far the biggest story from George Osborne’s Autumn Statement today was the unexpected housing market shake-up. The Chancellor’s announcement that the calculation for Stamp Duty Land Tax (SDLT) on residential property will switch from the current slab system to a marginal system is (similar to income tax) outlined in the table below.
The new method of calculation will come into effect from midnight this evening and replace the heavily criticised current system, which created ‘black holes’ in properties with values approaching the various price bands.
New Marginal Residential Stamp Duty Segments
(Effective from 00.00hrs 04/12/14)
Mr Osborne pointed out that on a £275,000 purchase the new Stamp Duty amount will be reduced by £4,500. Buyers who aspired to move up from their first home were frequently looking for a purchase in the £275,000 to £400,000 price range and were particularly hard hit when it came to finding the extra tax.
For that reason, house values between £250,000 and £300,000 were artificially held back under the old regime, meaning their owners could not reap the benefits of their asset because potential buyers were unwilling to pay the extra tax.
Residential Stamp Duty Bills
Slab Vs Marginal
*Average property value in Westminster (Land Registry Oct HPI),
**Average property value in Kensington & Chelsea (Land Registry October HPI)
Rory O’Neill, head of Residential, Carter Jonas, said: “This is good news for the majority of the population. It makes buying a house that little bit cheaper for many young buyers and hard working families plus it will reinforce the increasing confidence seen in the housing market.”
“Buying at over 1million however will be more expensive and there may now be an over reliance on transaction volumes in the £1million+ market to supply income to the Chancellor.”
“In hot spots such as central London, Oxford, Cambridge and Bath, it is likely to have very little impact as the competition remains intense. However, in the prime country market, which has already suffered significantly from the economic downturn and the last hike in SDLT, the additional tax on the sale of country houses is likely to restrict prices, and activity, even further.”
Importantly, Mr Osborne also made arrangements for those who have already exchanged contracts but not yet completed their purchase to work under the old or new Stamp Duty regime, depending on which system was most beneficial. This should prevent some deals collapsing as disappointed buyers with a changed tax bill decided to withdraw.