December 9, 2014

Explaining UK Stamp Duty Reforms on Residential Property

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Dec

09

Explaining UK Stamp Duty Reforms on Residential Property

The UK Government announced last week that it has cut Stamp Duty Land Tax. Implemented on 4 December 2014, the changes aim to make Stamp Duty payments fairer. The government estimates that the changes will help 98% of those who are liable for the duty. Our Mobility Insights Stamp Duty Reforms provides more information on these changes and how they may impact your UK relocation programme.

What is Stamp Duty Land Tax?
It’s a tax levy that home buyers must pay when purchasing a property. Stamp Duty rates increase in line with the value of a property and are charged as a percentage.

The Changes to Stamp Duty

•  The Old System – tax was paid at a single rate on the entire property price

•  The New System –  buyers will pay only the rate of tax on the part of the property price within each tax band

New Stamp Duty Land Tax Rates

 


Purchase Price of Property


New Stamp Duty Rates

  £0 – £125,000    0%
  £125,001 – £250,000    2%
  £250,001 – £925,000    5%
  £925,001 – £1,500,000   10%
  £1,500,001 and over   12%

Source: HM Treasury ‘Stamp Duty reforms on residential property’


Example:
If you purchased a property for £185,000 under the old rules, you would have paid 1% tax on the full amount (a total of £1,850). Under the new rules, you pay nothing on the first £125,000 and 2% on the remaining £60,000 (a total of £1,200), for an overall savings of £650.

Impact on Relocation
Relocating employees currently buying a house will not be inconvenienced, as those who have exchanged on a property before 4 December 2014 but have not yet completed (or ‘settled’ in Scotland) will be able to choose whether to use the old rules or the new. Those exchanging on a property after 4 December will pay Stamp Duty in accordance with the new legislation.

Scotland
In Scotland, the new Stamp Duty rates will apply until 1 April 2015, when the Land and Buildings Transaction Tax replaces the Stamp Duty in Scotland. The Cartus Mobility Insights Land and Buildings Transaction Tax has more information on this.

If you have any queries regarding this or any other aspect of your UK relocation programme, please do not hesitate to contact your Cartus representative.

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Posted By

Rob Abbott

About Rob

Robert is vice president of Client Services, EMEA. He has almost three decades of relocation experience, specializing in both the UK domestic and international mobility arenas.

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