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Last year the chancellor, George Osborne introduced a major reformation of Stamp Duty as we knew it. The system has been in force for a while but many home buyers are still in the dark about what the reforms actually mean for them.

What is Stamp Duty?

Introduced in 2003, Stamp Duty Land Tax (SDLT) is a transfer tax charged when purchasing a property.

What is the old system and why change it?

The old way of calculating Stamp Duty was by using what was known as a ‘slab system’. It would begin when a homebuyer purchases a property over £125,000. Any properties bought for up to £250,000 would then be charged at 1 per cent.

The stamp duty charges then rose to 3 per cent for properties worth more than £250k up to £500k and continued to rise to 4 per cent up to £1m, 5 per cent up to £2m and 7 per cent over £2m.
The problem with this system was that, if a buyer paid just one penny over the £250,000 threshold, they would be charged triple the amount of Stamp Duty.

So, what’s changed?

Under the new system, the amount of Stamp Duty owed will work in a graduated way, much like income tax.

Properties worth up to £125,000 will now continue to be Stamp Duty-free and this will gradually increase to 2 per cent as the value increases to £250,000, to 5 per cent to £925,000, to 10 per cent to £1.5m and to 12 per cent for everything over.

Will this affect everyone?

Yes. The new rules will save 98 per cent of homebuyers, potentially, thousands of pounds. However, homes that cost their buyers over approximately £937,000 may see their Stamp Duty increase.

The new thresholds mean that when purchasing the average family home of £275,000, a buyer will save £4,500.

The changes affect the whole of the UK until April, which is when the Scottish parliament plan on revealing their own tax reforms.

How much will I pay?

With any introduction or change in the housing industry, it is advised that you speak to professional independent mortgage adviser to discuss how they could affect you.
 

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