Following the not so popular, 'Mansion Tax' whereby homes that were valued at over £2m would face an annual charge, the Government has decided to change direction and reform the way duty is added.
It would seem that many people who had lived in their homes for a large amount of years would be charged an additional tax due to the natural increase in value. All properties that were valued at over £2m would be charged upwards of £10,000 per year. This caused concern to many of retired people who may have owned a valuable property but did not necessarily have the spare funds to pay this increase.
Government figures show there are approximately 100,000 properties in the UK that have this value to them. Of these 80% were in London but 22% of them were only flats.
New Stamp Duty Rates
As from 3rd December, a new stamp duty structure will come into force across the UK. Instead of the present slab structure at the current rate, stamp duty will be a more progressive tax. This is similar to the way income tax is paid. The figures work out thus:
- No tax is payable on the first £125,000
- Between £125,000 and £250,000 the charge will be 2%
- Between £250,000 and £925,000 the charge will be 5%
- Between £925,000 and £1,500.00 the charge will be 10%
- Over £1,500.00 the charge will be 12%
This form of tax will come across as a double winner for the Government as the average tax across the board is an increase should all grades decide to move. It will also assist those on a lower pay scale to be able to afford to buy a property as the tax is at a lower rate.
This could serve to ease progression for many more first time buyers up and down the property ladder. This, combined with the Governments, 'Help To Buy' scheme will make it more affordable to buy a home.
Advantages on Self-Build
When it comes to Self Build properties there has been no increase in taxes and you could save thousands of pounds. Firstly because although you pay duty on the cost of the land, it only comes into force on plots worth £125,000 and above.
There is no stamp duty on the building work or the value of the property when the works are completed.
Stamp duty is levied at 1% on property on property sales between £125,000 and £250,000, 3% for property between £250,000 and £500,000 and 4% for properties selling for more then £500,000.
This means that if you buy a plot for £155,000 and the final value of the property is £525,000, you would pay stamp duty of £1,500 (1% of the plot cost). In contrast someone buying a property worth £525,000 would have to pay stamp duty of £21,000 (4% of £525,000).
Shortages of properties for sale
Although the price of properties throughout the UK and USA are beginning to rise, plus there is a 50% rise in enquiries about properties, the market is still very quiet. Hopefully the reduction in tax duty will encourage more buyers to invest in a home of their own. Of course, the problem of a shortage of properties at the cheapest end of the market is still evident. Hopefully this will improve in the new year!
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