We know there has been a lot going on recently, especially with the recent financial crisis and the Government’s attempts at sorting out the issue, so you might have missed changes made to residential stamp land tax that happened in September 2022.
The changes were announced by Kwasi Kwarteng, Chancellor of the Exchequer, on 23rd September 2022.
The changes mean that you don’t have to pay stamp duty on cheaper properties, and the government is hoping that this change to the threshold will encourage first-time buyers to enter the property market.
But there are some concerns that the opposite will happen. The market is quiet when it comes to properties for sale. Many people have been put off moving home because mortgage rates are not healthy. Reducing the Stamp Duty Land Tax for cheaper properties might encourage people who already have more than one home to purchase cheaper properties, which might make things difficult in the long-run for first time buyers.
What is Stamp Duty Land Tax?
Stamp Duty Land Tax is a mandatory tax paid to His Majesty’s Revenue and Customs (HMRC) when someone buys a property. The amount you will need to pay will depend on the value of the property you are buying and your circumstances. There are benefits that can be claimed to reduce the amount of stamp duty land tax that needs to be paid.
You must pay your stamp duty land tax within 14 days of the transaction, the date that the property purchase is completed.
What Stamp Duty Land Tax will I pay
If a property is the only property you own and you are buying it, you will pay no Stamp Duty Land Tax on any property with a value of up to £250,000. On the next £675,000 (from £250,001 to £925,000) you will pay 5%. From there, you’ll pay 10% on the next £575,000, so from £925,001 to £1.5 million. Anything above £1.5 million, you’ll pay 12% tax on.
If you own another residential property, you’ll pay 3% on top of these rates.
What has changed?
Previously, the nil-rate band for stamp duty land tax only applied to properties worth less than £125,000. The doubling of this rate should encourage people to buy properties that are more expensive, boost the property market, and fuel growth.
Previously, people buying houses worth between £125,000 and £250,000 had to pay stamp duty of 2%. In real terms, it means that tax savings of £2,500 for house purchases over £250,000.
On top of that, if you are a first time buyer and you are buying a home up to a maximum value of £625,000, there’s a nil-rate band in place up to £425,000. This means you will pay no tax on £425,000, then 5% tax on any value between £425,000 and £625,000. If you’re buying a property worth more than that, there is no tax relief in place.
What about Scotland and Wales?
SDLT is devolved in Scotland and Wales, so those governments will receive funding to allocate as they see fit, but it is not yet known whether they will use that funding to amend the land tax rates to reflect the changes made in England and Northern Ireland. It’s highly likely that they will make at least some changes.
Why were there changes to the SDLT?
It is vitally important that home ownership is affordable, and this was the Government’s attempt at doing that, but there are concerns that boosting demand in this way, when there are not enough houses on the market, could mean prices hike even further, making things even more difficult for first time buyers.
Aside from that, there are concerns that rising interest rates might stifle the market even further.
Stamp duty calculator
If you’re still not sure how much stamp duty you will pay, there are several calculators you can use online in order to work it out.
JMR Solicitors can help
Whether you are a first time buyer or not, JMR Solicitors can help. We’ll guide you through every step of the process.
Our team of experts are based in Manchester and are an award-winning team. We’ll take as much stress as we can out of the house buying process so that you can enjoy the process of purchasing your new home. Our solicitors are friendly and knowledgeable, and will walk you through the process of buying your new house, whether it’s your first ever home or a second property. We understand that these are difficult times to navigate, but we have your back!
To speak to a dedicated member of our team, please call 0161 491 3933, or email email@example.com.