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Stamp Duty Reforms: Residential Property

Changes to Stamp Duty were announced last week as part of the Chancellor's Autumn Statement. This new system of stamp duty now applies across the UK. In Scotland, it applies until 1 April 2015 when it will be replaced by the Land and Buildings Transaction Tax (LLBT) previously announced by the Scottish Government.

One of the key changes is that Stamp Duty will no longer be a "slab tax" paid at a single rate on the entire price of the property (which sometimes resulted in sudden increases in the Stamp Duty a buyer would have to pay when the price of a property passed a certain threshold.)

With the new Stamp Duty, different rates will apply within a series of bands with a different rate being charged on the on the portion of the purchase price that falls into each band (not unlike the way that income tax bands work). These bands and new rates of tax applicable are as follows:

Purchase price of propertyRate paid the part of the property price within that tax band
Up to 125,0000%
125,001 - 250,0002%
250,001 - 925,0005%
925,001 - 1,500,00010%
Above 1,500,00012%

For example, on a 510,000 property the tax under the old rules would have been 20,400 which will reduce to 15,500 under the new rules (an effective rate of 3%.) On a 2,100,000 property the tax will increase from 147,000 to 165,750 (an effective rate of 7.9%.)

You can work out how much Stamp Duty you will have to pay using HMRC's Stamp Duty calculator for residential properties.

Further key points of the changes to Stamp Duty are as follows:

  • Purchasers paying less than 937,500 for a residential property will pay the same or less in stamp duty under the new rules. The chancellor said that 98% of people who pay stamp duty will be better or no worse off under the new system.
  • In Scotland for purchases settled after 4 December 2014 stamp duty will be payable under these new rules.
  • For purchases settled on or before 3 December 2014, but which have not yet filed your stamp duty return, stamp duty will be payable under the old rules.
  • In the case where missives concluded before 4 December but settlement is on or after that date then there will be a choice as to whether the old or new rules apply. In the majority of cases less tax will be payable under the new rules.
  • These changes do not affect commercial properties.

Further Changes to Stamp Duty in Scotland from April 2015

From April 1 2015, Stamp Duty in Scotland will be replaced by a new Land and Buildings Transaction Tax (LBTT) For more information on the new system and to calculate how much tax you will be liable to pay under LBTT visit the Revenue Scotland website here.