Island Life Magazine Ltd February/March 2015 | Page 115
Roach Pittis advice
By Ian Bradshaw
Roach Pittis Solicitors,
60 - 66 Lugley Street, Newport, PO30 5EU
01983 524431
[email protected]
Stamp duty rules
I
n last year’s Autumn Statement the
Chancellor announced changes to the
way Stamp Duty Land Tax (SDLT) was
levied on residential house purchases. The
changes that took effect from December
4, 2014 mean that individuals who
purchase residential property now are
increasingly likely to pay less tax under
the new regime than under the old rules,
provided they are purchasing for less than
£937,500 which is the tipping point for it
being more expensive.
From December 4 an individual
purchasing a house for £200,000 would
pay £1,500 SDLT. The same individual if
buying the house at the same price under
the old rules would be paying £2,000.
Under the old rules SDLT was charged
on the total value of the property at a fixed
rate. For residential properties bought by
an individual up to the value of £125,000
no tax was paid. For properties bought
at between £125,001 to £250,000, one
per cent of the purchase price was levied,
between £250,001 to £500,000 three
per cent of the purchase price and for
properties bought between £500,001 to
£1,000,000 four per cent. Under the old
rules therefore a purchase at £350,000 fell
into the three per cent bracket, resulting in
£10,500 SDLT payable.
Under the new rules the tax payable
depends upon how much of the purchase
price is payable within each tax rate band.
In other words fixed rates were abolished
in favour of a tapered scale. The new rates
are as follows;
The first £125,000 on all residential
purchases by an individual is zero rated
meaning no tax payable. Between
£125,001 to £250,000 tax is charged
at two per cent; over £250,000 to
£925,000 five per cent and over £925,000
to £1,500,000 is 10 per cent. Finally
everything over £1,500,000 is 12%
Accordingly in our example of a
purchase at £350,000 SDLT would be
calculated as follows;
First £125,000 – zero rated = no tax.
Next £125,000 – two per cent rated =
£2,500. Final £50,000 – five per cent
rated = £2,500. Total £5,000.
This means there is a total tax bill of
£5,000 representing a saving of £5,500
from the old tax calculation. The alteration
made has prevented the situation that
arose under the old rules that meant a
purchase at £125,000 incurred no tax
whereas a purchase at £126,000 incurred
a fixed rate one per cent charge meaning
a £1,260 tax bill.
Tax is now levied on the portion of
the purchase price that falls within the
relevant band; in short the result of this
is that the majority of people now pay
less tax meaning it is easier financially to
purchase a property. It should be noted
that different rules apply for commercial
property and purchases by companies.
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