Chancellor Kwasi Kwarteng today announced a cut to stamp duty tax, but what does it mean for you?
Under the old system, anyone buying a residential property costing more than £125,000 would pay stamp duty tax, but the government have increased that threshold from today to £250,000. This means buyers will pay no stamp duty tax on the first £250,000 of a property, and none overall on a property that costs less than that.
The new stamp duty tax is then 5% on any amount over £250,000 up to £925,000, 10% on any amount above that up to £1.5 million, and 12% on any amount above that. So for example, if you purchase a house from today for £300,000, you would pay 0% stamp duty tax on the first £250,000, then 5% on the remaining £50,000, which would equal £2,500, and so your total stamp duty tax payment would be £2,500.
Under the previous thresholds, buyers were also required to pay 2% tax on the portion from £125,001 to £250,000. So, someone who bought a house before today for £300,000 would pay 0% on the first £125,000, then 2% on the amount above £125,000 and up to £250,000, and then 5% on the remaining £50,000, which would equal £5,000.
The threshold has also changed for first-time buyers, who can claim a discount or 'relief' on their stamp duty tax. First-time buyers will pay no stamp duty tax on on properties up to £425,000 from today, whereas the threshold previously was £300,000.
In summary:
- Up to £250,000 - Zero stamp duty
- The next £675,000 (the portion from £250,001 to £925,000) - 5% of cost
- The next £575,000 (the portion from £925,001 to £1.5 million) - 10% of cost
- The remaining amount (the portion above £1.5 million) - 12% of cost
For example if in October 2022 you buy a house for £295,000, the Stamp Duty you owe will be calculated as follows:
- 0% on the first £250,000 = £0
- 5% on the final £45,000 = £2,250
- total SDLT = £2,250
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