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The Autumn Statement – what do the changes mean for buyers?
December 5, 2014Article by Ray Withers
At midnight on Thursday 4 December, the stamp duty changes announced in the Autumn Statement came into effect. A scramble to rush through transactions at the top end of the market preceded the changes taking effect, with wealthy buyers looking to complete their purchases before rates went up. One buyer in the London area apparently saved more than £1.4m on the purchase of a £30m house in Surrey by exchanging at 11.45 pm.
While those buying hugely expensive properties might be groaning about the changes, the rest of the market is breathing a sigh of relief. Chancellor George Osborne has said that stamp duty will be cut for 98% of homebuyers, so the changes have clearly been designed with mass appeal in mind.
Essentially, stamp duty rates will now only apply to the part of a property that falls within each band, the bands being:
- 0% paid for the first £125k
- 2% paid on the portion of the property up to £250k
- 5% on the portion between £250k and £925k
- 10% on the portion up to £1.5m
- 12% on anything higher
For an average priced home, the Chancellor’s changes should amount to a saving of around £4,500 – a significant sum for those looking to purchase a new home. This is great news for the lion’s share of buyers, from owner-occupiers to buy-to-let landlords.
The removal of the previous ‘slab’ approach to stamp duty and the implementation of the tax being levied on a graduated sale in proportion to the property’s value represents a dynamic shift in the market. It should remove the current trend of property prices bunching up just below each threshold and allow for a more free-flowing market.
For all but the wealthiest of buyers, the changes should represent a saving when they purchase their new home. Whether introduced due to a genuine will to reform a system that many previously felt was unfair or simply as a pre-election sweetener makes no difference – the result is still that almost all homebuyers will save money next time they move.
The changes should boost the movement of properties costing roughly up to the £1m mark in the UK. The growing trend of individuals using their capital to become buy-to-let landlords will no doubt benefit as well, as the changes will mean reduced fees on buy-to-let properties in leading cities across the country.
While it will take some weeks for the impact of the stamp duty reforms to truly be understood, I am confident that the changes will have a positive effect on buyers of all but the priciest of properties.