Government reforms to Stamp Duty will save more than 99% of Croydon homebuyers a significant amount of money
The most eye-catching measure that the Chancellor announced in today’s Autumn Statement was a wholesale reform of Stamp Duty for residential property.
At the moment, the rate of Stamp Duty you pay depends on the price of the property you purchase and that rate applies to the entire purchase price as the table below shows:
Purchase price Stamp Duty rate
Up to £125,000 0%
This means that if you buy a property worth £250,000 you pay £5,000 in Stamp Duty, but if you buy a house worth just one pound more and you pay over £7,500. This is clearly unfair and has a distorting effect on house prices.
And as house prices have risen in recent years, the amount of Stamp Duty that people have had to pay has increased significantly, making it harder for people to get on the housing ladder or move to a bigger home when they start a family.
The Chancellor is therefore changing the way Stamp Duty will work to make it fairer and to significantly reduce how much most of us have to pay. From midnight tonight, Stamp Duty will work like income tax with each rate only applying to the part of the property price that falls within that band. You’ll pay no Stamp Duty on the first £125,000, 2% on the next £125,000, 5% from £250,000 up to £925,000, 10% from £925,000 up to £1.5 million and 12% on everything over that.
This represents a tax cut for more than 99% of Croydon homebuyers (the only people who will pay more are those buying homes worth over £937,000). Someone buying a £300,000 property will pay £5,000 less - you can find out how much you might save here.
For a number of years, there has been a debate about whether people living in the most expensive properties should pay more in tax. This reform will ensure that they do when they buy those properties. And that’s much fairer and cheaper to administer than Labour’s plans for a so-called Mansion Tax. They have in mind an annual payment and the problem with that is that there are quite a lot of people who bought a house years ago which is now worth quite a lot of money but they don’t necessarily have a large income. Labour’s proposal would also require an expensive revaluation of all properties throughout the country to determine which ones would be subject to the Mansion Tax.
So the Chancellor has come up with a way forward that deals with the distorting effects of the current Stamp Duty system, cuts the bills most of us pay making it easier for people to get on the housing ladder and deals with concerns that those living in the most expensive properties should pay more tax in a way that is fairer and simpler to implement than Labour’s alternative. You can’t ask for much more than that.