Stamp Duty Land Tax Changes – What They Affect, and How
A new system in determining Stamp Duty Land Tax has been announced, which will provide a significant cost saving to the average home buyer. Read on to learn more about the changes. Useful information for CII CF1, CF6, ER1, R03, R07 and AF1 candidates.
Stamp Duty Land Tax (SDLT) underwent radical change in the Chancellor’s 2014 Autumn Statement.
Gone is the hugely unpopular ‘slab style’ system (where purchasers paid tax at the highest rate chargeable on the whole purchase price).
In its place stands a new ‘progressive’ system, which works in a similar way to income tax and capital gains tax insofar as the rates chargeable only apply to the amount of the purchase price that sits within each band.
The New Stamp Duty Land Tax Rates
The new rates* are as follows:
| Rate | Residential land/property |
0% | £0 – £125,000 |
2% | £125,001 – £250,000 |
5% | £250,001 – £925,000 |
10% | £925,001 to £1.5m |
12% | Over £1.5m |
An Example of a SDLT Calculation
So, for example, a property with a purchase price of £175,000 would be liable to SDLT of:
The first £125,000 @ 0% =£0
£175,000 – £125,000 = £50,000 chargeable at 2% = SDLT of £1,000
A property worth £300,000 would be liable to SDLT of:
The first £125,000 @ 0% = £0
£250,000 – £125,000 = £125,000 chargeable at 2% = £2,500
£300,000 – £250,000 = £50,000 chargeable at 5% = £2,500
£2,500 + £2,500 = SDLT of £5,000.
And so on.
Most Home Buyers Will Be Better Off
The Chancellor has said that only buyers purchasing properties worth in excess of £937,000 will be worse off under the new system. 98% of home buyers are expected to be better off.
With the average family home costing £275,000 (source bbc.co.uk, 2015) the new system gives a significant cost saving of £4,500 to the average buyer, hence its warm welcome by press, industry and the public alike.
Some Things Remain the Same
The revised system does not affect non-residential land transactions where the old rules still apply. Corporate bodies are still liable at the anti-avoidance rate of 15% on residential properties valued in excess of £500,000.
There has been no change to the fixtures and fittings rules – a reasonable figure can still be deducted from the purchase price before SDLT is applied.
The revised system will be examined by the CII from 2nd March 2015.
* SDLT rates do not appear on the CII’s exam tax tables, you’ll need to memorise the rates and the bands.
Grab the resources you need!
If you’re studying for your CII R03 exam, and you’re feeling a bit anxious, grab our free taster to try out one of Brand Financial Training’s resources for yourself. Click the link to download the R03 calculation workbook taster now!
Alternatively, you can download the taster for either CF1, ER1, R07 or AF1 if one of those exams is keeping you awake at night.
Over to You…
Are you feeling confident of the changes for your exam? Can you do the calculations quickly and easily?