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Stamp duty changes surprise market as experts claim it will increase house prices

The surprise change in stamp duty is likely to benefit existing homeowners more than those looking to buy property, according to industry experts.

Autumn Statement 2014

The surprise change in stamp duty is likely to benefit existing homeowners more than those looking to buy property, according to industry experts.

Chancellor George Osborne announced the changes earlier today as a part of the Autumn Statement, with the reform of stamp duty likely to offer a fresh boost to the housing market whilst causing house prices to increase on homes where tax will be cut, experts have warned.


The move away from the “slab structure” system which saw the entire cost of the property assessed and taxed according to the highest band it fell into. This tiered system offered large increases between bandings, particularly at the £250,000 threshold. Properties costing £249,000 would incur a 1% tax charge of £2,490, whilst a 3% duty of £7,530 would be applicable to a house priced at £251,000.


The chancellor addressed MPs saying that: “In recent years the burden of stamp duty has increased on low- and middle-income families trying to buy a new home, as prices have risen. This makes it even more difficult to get together the cash deposits buyers need. It’s time we fundamentally changed this badly designed tax on aspiration.”


The chancellor claimed that the changes would benefit 98% of all home purchasers and would save £4,500 on the average house price of £275,000. The changes add new thresholds and taxation rates on properties from £125,000, the price at which taxation begins.


The new changes will see a steadier increase in duty across the different taxation bands to ensure that those near the threshold are not penalised. Homes costing between £125,001 and £250,000 will pay 2% duty costs and properties between £250,001 and £925,000 a rate of 5% will be applicable. From here, properties priced up to £1.5m will pay a 10% duty and properties valued above £1.5% will incur a tax of 12%.


Whilst this will help those who were previously affected by the steep differences in duty around the value of £250,000, the reforms also offer buyers paying between £1m and £1.1m a better taxation rate.


However, these changes have also seen those with homes above the £2m mark rush to push through sales before the midnight deadline tonight, as the rise in taxation on these properties will see charges rapidly increase. Buyers at the top end of the market will now face far bigger costs as the government attempts to offset an £800m reduction in bills on lower-priced homes. A £2m property would have seen under a £100,000 tax incursion under the current laws, but will face a bill of £153,750 under the new law.


Following the surprise announcement, the market saw an increase in activity on homes costing more than £937,000, as buyers were offered the opportunity to pay less tax on their purchase.

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