Most people looking to buy a house received an early Christmas present with news of a fundamental change in the amount of stamp duty paid on a house purchase. Following an announcement in Chancellor George Osborne's autumn statement, a revised set of scales has been introduced that Mr Osborne says will cut the duty paid by 98 per cent of all home buyers.
Essentially, each tax rate will apply only to the particular slice of the buying price to which they apply, and not, as previously, to the whole value of the property. In the new scale of charges, the first £125,000 of the purchase price remains tax-free, while the remaining portion up to £250,000 will attract 2 per cent stamp duty. Any price above that will attract a 5 per cent tax for the portion from £250,000 up to £925,000 and 10 per cent of the remainder up to £1.5m. Anything above that will attract 12 per cent duty. The previous rates were: up to £125,000 - no tax; £125,001 to £250,000 1 per cent on the whole purchase price; £250,001-£500,000 3 per cent; £500,001-£1m 4 per cent; over £1m-£2m 5 per cent; over £2m 7 per cent. The point here is that previously the total purchase price was liable for tax at the highest rate applicable.
But there are anomalies. Under the new rates, a purchase price of £250,000 will attract the same amount of tax as under the old rates - £2,500 - while any purchase between £125,000 and £249,999 will save money. On a £400,000 purchase, there is a £2,000 saving. However, a £500,000 purchase pays the same duty as before.
Data from the Council of Mortgage Lenders suggests that, among mortgaged transactions over the past year, 21.6 per cent were for less than £125,000, 47.9 per cent for £125,001-£250,000, 29 per cent for £250,001-£925,000, 1.1 per cent for £925,001-£1.5m, and 0.4 per cent for over £1.5m. The proportion of mortgaged transactions that would pay more tax under the new system is around 1.5 per cent.
Shares in housebuilders were generally higher, although Berkeley Group (BKG) shares lost ground, reflecting the builder's exposure to high-value properties in London.
