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Tax Tip

Stamp Duty what it means

Stamp Duty Land Tax applies to properties that cost over £125,000. This tax applies to both freehold and leasehold properties – whether you’re buying outright or with a mortgage.

However, sweeping changes to stamp duty were announced in the Chancellor's Autumn Statement in December 2014.

Before the new system came into being (04/12/14) it was often referred to as a “Slab tax” where there were significant changes in the rate payable, which caused a cliff edge effect.

For example, on a property valued at £300,000, because the purchase price is over £250,000, you'd have paid 3% on the entire purchase price, despite only being £50,000 above the threshold. Thus, you'd have paid £9,000 in stamp duty.

In the new system, on the same property, you pay nothing below £125,000; 2% on between £125,000 and £250,000, and 5% on the value of the property above £250,000. So in total this means you'll pay £5,000 (£0+£2,500+£2,500), a saving of £4,000

The Government considers that this will create a much fairer system and those buying residential property up to £937,500 (about 98% of all purchasers) will pay less SDLT.


The full rate sheet from December 4 2014 is:

Purchase price band                                     SDLT rate                   Cumulative
up to £125,000                                                NIL                               NIL
£125,000 to £250,000                                    2%                               £2,250
£250,000 to £925,000                                    5%                               £36,250
£925,000 to £1,500,000                               10%                               £93,750
£1,500,000 and over                                     12% 

However there are other circumstances in which Stamp Duty is either not payable or can be reduced:

  • If the purchase price is only just within a higher band, ask the seller or estate agent if they would accept a slightly lower price
  • If you are divorcing or separating from your spouse or partner, there’s no Stamp Duty to pay if you transfer a proportion of your home’s value to them. Read more in our guide Your home and your divorce settlement
  • If you transfer the deeds of your home to someone else – either as a gift or in your will – they won’t have to pay Stamp Duty on the market value of the property. To find out more about transfer of deeds, go to the HMRC website
  • However, if you exchange properties with another person, you will each have to pay Stamp Duty on the property you receive based on its market value

For further information, either look at the HMRC website, or contact , contact Lavinia Newman, Stuart Coleman or Liz Kennett to discuss how ABDS can help in all your financial planning and business advice.
 

ABDS Chartered Certified Accountants of Southampton.
Tel: 023 8083 6900  E-mail: abds@netaccountants.net

Brilliant with numbers   
Great with people  
Clear and precise with advice
Timely and cost effective 
In touch with issues that face our clients and
mindful of their long term strategic goals

Helping Your Business is Our Business

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