Britain’s “worst-designed and most damaging” tax is to reformed in plans set-out by the Chancellor in today’s Autumn Statement. Stamp Duty on residential property purchases will no longer increase in “slabs”, and from midnight tonight buyers will only pay the higher tax rate on the portion of the value in the higher band.
Abolition of the slab will remove the anomaly whereby anyone buying a property for £250,000 pays £2,500 in tax, but those buying properties for £250,001 pay over £7,500. The tax was widely hated by the middle class as the average house price in Britain is £275,000. In the House of Commons the Chancellor called it a “badly-designed tax on aspiration”.
From midnight tonight there will be five new bands, and like income tax buyers will only pay the higher rate on the portion that falls into that band. The new bands are:
Up to £125,000 – Exempt
Up to £250,000 – 2 percent
Up to £925,000 – 5 percent
Up to £1.5m – 10 percent
Over £1.5m – 12 percent
The Chancellor pledged that this will cut tax for 98 percent of home-buyers. He said: “In recent years the burden of stamp duty has increased on low and middle income families trying to buy a new home, as prices have risen.
“This makes it even more difficult to get together the cash deposits buyers need. It’s time we fundamentally changed this badly-designed tax on aspiration… It is a fair, workable, lasting reform to the taxation of housing.”
In order to ease the transition to the new system anyone who has already exchanged contracts but not yet completed will have the right to choose which of the systems to use to assess their tax bill.
Jonathan Isaby, Chief Executive of the TaxPayers’ Alliance said: “Stamp Duty reform will be an early Christmas present for young people looking to get on the housing ladder and families who want to move home.
“The Chancellor is right to significantly reduce the burden that this tax on ambition has placed on hard-pressed taxpayers. Let’s hope this is a first step towards abolishing Stamp Duty altogether.”
Prof Philip Booth, Editorial and Programme Director at the Insiture of Economic Affairs, said: “Stamp duty on property transactions is a bad tax and should be abolished. Any movement in that direction is welcome. As such the reduction in stamp duty at the bottom end and the removal of the slab system is welcome.
“However, the stamp duty rates of 10% and 12% at the top end are confiscatory and pernicious. Back in the 1970s, not even the most left-wing member of the Labour Party could have dreamed of a property transaction tax at this level.”