We’re constantly hearing the phrase “we need to build more houses”, however in order to build more houses the nation’s construction firms need to be sure they can sell them. Therefor the Chancellor, George Osbourne’s announcement regarding reduced stamp duty for most buyers should be welcome news to the industry.


From tonight, George Osbourne has said there will be a cut for 98% of homebuyers.


The current stamp duty tax, where the amount taken from home buyers jumps at different thresholds, will be replaced by a graduated tax rate which will work in a similar manner to income tax.


The new stamp duty tax rate appears to be a bit complicated though, with the new stamp duty rates only applying to that part of the property price that falls within the defined bands.

What happened before today’s announcement?

 

  • * Between £125,001 and £250,000 – a 1% charge;
  • * Between £250,001 and £500,000 – 3%;
  • * Between £500,001 and £1m – 4%;
  • * Between £1m and £2m – 5%;
  • * Above £2m – 7%.


What’s going to happen after today’s announcement?

 

  • * Between £125,001 and £250,000 the rate will be 2%
  • * Between £250,001 and £925,000 the rate will be 5%
  • * Between £925,001 and £1.5m the rate will be 10%
  • * Above £1.5m the rate will be 12%.


The percentage the house buyer pays will only be applied to the part of the value of the house the tax applies to (similar to the way income tax works). So if someone buys the average house in the UK for £280,000 in the old system they’d pay £8,400, whereas now they’d pay £3999.98 stamp duty.


People in the process of buying a property are able to choose which stamp duty system they use, so there shouldn’t be any knock on impact for existing sales.


Removing a barrier to entry for new buyers and for the majority of those wishing to progress up the property ladder must be good news for our industry and should create renewed confidence in the recovery and the opportunities in the housing market.