The Property Ombudsman

Stamp duty changes are positive for buy to let

Autumn statement 2014

Chancellor George Osborne announced new changes in stamp duty rules in the Autumn Statement recently.

The reform has been put in place immediately to benefit 98% of households in the UK, and is said to help first time buyers and young families to get on the property ladder. Those paying for the higher-end properties will see a significant increase in costs.

Previously, stamp duty rates were set into brackets, which many referred to as a “slab structure” and the rates per purchase were split as follows:

  • Below £125,000 - 0% charge
  • Between £125,001 and £250,000 - 1% rate
  • Between £250,001 and £500,000 - 3% rate
  • Between £500,001 and £1m - 4% rate
  • Between £1m and £2m -5% rate
  • £2m and above - 7% rate

From midnight on 4th December, there will still be no tax on purchases up to £125,000. Above this amount, house prices are broken up into four bands.

  • Between £125,001 and £250,000 - 2% rate
  • Between £250,001 and £925,000 - 5% rate
  • Between £925,001 and £1.5m - 10% rate
  • £1.5m and above - 12% rate

The old structure saw buyers taxed on the property as a whole so, for example, a house costing £135,000 would have a stamp duty of £1,350.

Under the new rules, the tax will be applied in a similar way to income tax, so you only have to pay a percentage of the remaining amount.

On a £135,000 house purchase there will be no tax to pay on the first £125,000, then 2% on the remaining £10,000, which is £200.

comments from sequre

Sequre MD, Graham Davidson commented on the changes, “Overall the Autumn Statement is a positive one for the buy to let market and we are pleased with the reform to stamp duty.”

“Scrapping the slab rate system will benefit the housing market as a whole, and it’s also good news for our buy to let investors, for example, a buyer of a high end 2 bedroom Manchester City Centre apartment at a price of £150,000 will now pay just £500 stamp duty, a saving of £1,000.”

“However the impacts on the £925,000 plus market will certainly be felt throughout the industry, in particular by the higher-end London property market. We would expect to see this contribute to a further slowing of the market there.” 

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