Autumn Statement Stamp Duty Land Tax

Autumn Statement and the changes to Stamp Duty Land Tax with effect from 4 December 2014.

Transcript:

“Hello there, it's December 3 it's George Osborne's Autumn Statement, the Pre-budget report for 2014. Literally, he’s just stopped talking around about an hour ago and I've been analysing all of the small print that's been released of the autumn statement and having a quick look.

The subject for this video is stamp duty which will affect many of us.  Many of us buy and sell houses over the years and this clearly affects us.  So, first things first, he is has totally changed with effect from midnight tonight how stamp duty works and the way stamp duty will work from now on is on a tiered basis just like income tax.  So each tier you pay some tax based upon what particular band of value that is.  So just like income tax that is the way to think about it is for your first income tax is simple for the first £10,600, under the new limits you pay no tax. For the next approximately £31800 you pay 20% and then £42,350, you into higher rate tax.

So you gradually increase your tax through the bands. That's now going to be the same for a progressive stamp duty land tax.

If you buy a property worth £125,000 or lower - zero tax rate.

If you buy a property between the values of £125,001 and up to earn 250,000 then that band will pay 2%

If you buy a property £250,001 up to £925,000 then the stamp duty rate is 5% and then

If you buy a property £925,001 up to £1.5 million the stamp duty rate is 10% and

If you buy property worth more than £1.5 million that the stamp duty rate is 12%

So let us all have try explain how that works, so remember these are bands so the way will now work is:

If you buy a property for £200,000 okay?  The way that would have worked previously is you would have paid stamp duty of 1% on the whole lot.  You’ve bought the property for £200,000, 1% stamp duty on the whole lot, the bill is £2,000.

Now under the new rules with effect from midnight, in bands of that £200,000 the firs £125,000 - no tax to pay, and then just that band between £125,000 and £200,000 that will then get taxed at 2%.

So it goes in bands.  So if you buy a property worth £1 million, so you bought a property for a million pounds, ‘lucky you, and £1m under the new rules with effect midnight tonight:

1^st £125,000 of that purchase price no stamp duty

The next £125,000 through to £250,000 taxed at 2%

Then the next £250,000 up to £925,000 that’s taxed at 5% and then

The balance £925,000 through to £1 million that's taxed at 10%

So you pay tax at all levels through the bands.

I think that’s quite a clever move at the moment it will mean anybody you buy is a house worth £937,500 or less will today, from midnight, pay lower stamp duty. Anybody who buys a property worth more than that will pay higher stamp duty. 

So is that a ‘mansion tax’ indirectly?  Yeah, I suppose it is. I think it is designed to appease voters. I think therefore, you know, there is a transfer of, you know, higher value people or higher value properties, people who can afford to pay them, are bearing a greater tax burden.  So there is an element of that.

Long-term I have concerns that because these rules have now been changed to a structured tier basis then they will be able to play around with stamp duty and rates and limits until their ‘hearts content’ and raise money as when they see and control it the same as they do with income tax.  So that's a little bit different whereas today the government has to rely on market forces of properties rising or falling at to whether they move into from a nil tax rate to a 2% to 3%, 1% to 3% etc.  Whereas today all properties will be subject to those tax plans.  So interesting move and what they can do is obviously playing around with those limits and play around with those rates.

Maybe they’re expecting a property boom, not necessarily for the next couple years but certainly we’re all looking at wages starting to rise now faster than inflation which ultimately will start to push property prices up.  As well there is a population boom coming.  We’re expecting another million plus European nationals to settle in Britain in the next five years on top of that the population is set to expand by another, around , I’ve seen estimates of around 10 million people in the next 10 to 15 years. 

So there is always going to be a property shortage.  They can’t possibly build that many properties.  So maybe that’s quite a shrewd move from a Chancellor but as far as today is concerned stamp duty the amount you pay from midnight is lower for most people although if you are caught I did see in his speech that the chance has given a caveat to say: ‘well, if you are in the middle of between - you’ve exchanged contracts and you’re looking to complete on the sale of your property, you can elect to choose which stamp duty is better for you.  So you can elect but once that's gone then we’re all into these new rates and like I have said: for most people properties buying properties below £937,500 we’re all better off but those at the other end well were actually worse off.  I did some calculations myself and I think the sort of people who properties of £2 million, £1 million plus £1.5 million, I actually think it's knocked off about £20,000 off the value of your house but there you go.  So good for most people at the lower end, for people who live in London and the south-east I suspect that were not going to be as happy. So that’s the stamp duty land tax changes as at December 2014.  Thanks very much for watching.”