With yesterday’s Autumn Statement, the Chancellor brought the housing market a bit of an early Christmas present and announced the best news for home buyers since 2010’s stamp duty holiday. Of course that holiday ended in 2012 and was considered only a short-term measure to boost buying, but here we are with a move that is promised to help 98% of home buyers.
So what are the headlines for the stamp duty revamp and how will they affect our buyers? Well before the Autumn Statement, stamp duty was paid on the whole purchase price for a property as follows:
- £125,000 or under – 0% stamp duty;
- £125,001 to £250,000 – 1% on full purchase price;
- £250,001 to £950,000 – 5% on full purchase price.
So the people who benefited the most were those buying a home under the £125,000 bracket. The changes, which will take affect from today, will now also benefit buyers whose homes cost more than £125,000.
Under the new system, stamp duty will work like income tax, where you get a tax-free allowance and then pay a different rate of tax on each portion of the price, as follows:
- No tax up to £125,000;
- 2% tax from £125,001 to £250,000;
- 5% from £250,001 to £925,000.
So for a Countryside home priced at £140,000, buyers won’t pay stamp duty on the first £125,000, only paying 2% on the additional £15,000 of the purchase price. To put this into context, here’s an illustration of the old system versus the new:
- Stamp Duty for a home priced at £140,000 under the old system:
1% of £140,000 = £1,400.00
- Stamp Duty for a home priced at £140,000 under the new system:
0% for the first £125,000 = £0
2% on the additional £15,000 = £300.00
So a buyer of a £140,000 home will make a saving of £1,100 with the stamp duty shake-up. The financial benefit for buyers is obvious and it will significantly ease the upfront fees that come with owning your own home. If coupled with the small 5% deposit needed under the Government’s Help to Buy scheme, home buying affordability has taken a huge leap forward.
The question does remain on how these changes will impact the housing market, but there is a very wide-spread feeling of optimism that the overhaul will make home buying a much more accessible option to a generation trapped in the rental cycle and the knock on affect on house building will undoubtedly be positive.
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