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By Robert Lee, Tax-News.com, London
05 January, 2015
The changes to the UK stamp duty regime announced in December's Autumn Statement may help stimulate domestic housing market activity, according to the Nationwide Building Society.
In his annual mini-Budget, UK Chancellor George Osborne announced a major shakeup of the stamp duty land tax (SDLT), effective from midnight on December 3, 2014. The new system is band-based, with each rate applicable on only the part of the property value that falls within the given band.
The Nationwide's latest House Price Index suggests that the marginal SDLT should help to remove distortions caused by the old slab structure, which it says led to a "clustering of transactions."
The first GBP125,000 (USD194,705) of the property price is now exempt from stamp duty. A rate of 2 percent is payable on the portion up to GBP250,000, 5 percent up to GBP925,000, 10 percent up to GBP1.5m, and 12 percent on the value above GBP1.5m.
In total, nearly 590,000 homebuyers in England and Wales should benefit from the changes, with an average saving of GBP1,600. According to Nationwide, those looking to purchase property worth just above GBP250,000 should benefit the most. They could save around GBP5,000 in tax, or approximately two percent of the purchase price.
Average house prices are higher in the south of England, and Nationwide estimates that 85 percent of transactions in London, the south-west, and south-east will benefit from the changes. By contrast, around 50 percent of transactions in the north, Yorkshire and Humberside, and the north-west of England will benefit.
Roughly 12,500 purchasers will pay more as a result of the changes, with an average increase of GBP30,900 in duty expected. Two-thirds of those paying more will be in London, which has a significantly larger proportion of high-value transactions than other regions.
The SDLT reforms will only be applicable in Scotland until April, when a new, devolved Land and Buildings Transaction Tax (LBTT) will enter into force. The Nationwide calculates that, under the LBTT, purchasers buying property worth less than GBP325,000 will pay less than they would have under the pre-December 3 SDLT regime.
However, as a result of the Autumn Statement changes, those in Scotland purchasing properties above GBP254,000 before the LBTT comes into effect on April 1 could make a substantial saving. The Index estimates an average saving of approximately GBP5,900. This could encourage prospective buyers to bring forward their purchases.
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