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Stamp Duty reform – the industry view

by: Samantha Partington
  • 03/12/2014
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Stamp Duty reform – the industry view
George Osborne has done away with the slab structure of Stamp Duty Land Tax after years of industry lobbying and will replace it with a structure akin to income tax.

House buyers will no longer be penalised for falling into a higher price bracket by £1.00, leading to them paying a more expensive rate of tax on their whole property. Instead the structure will be sliced up and repriced from midnight tonight.

To read the full details of the changes and the new rate structure press HERE.

As the announcement fed through to inboxes and twitter feeds the mortgage and property industry were quick to react. Here’s a selection. 

Nigel Payne, consultant at Blacks Connect, said: “As you might imagine lots of calls are already coming in to Blacks from clients asking how this will affect them. The downside is for all those people who completed last Friday – the last Friday of the month is always the busiest – and most have lost out. The positive, and critical point, going forward is that the new system will largely eradicate the impact the previous system had on house prices.

“Large house price gaps were created by the slab system, for example, few houses are on the market priced at between £250k and £275k or £500k to £575k as sellers knew they would have to sell beneath the previous limits or substantially above them. This is now likely to change.”

Jamie Morrison, partner at HW Fisher & Company, said: “The abolition of the Stamp Duty slab system is a long overdue and very welcome reform to an unfair, and archaic, tax. However, it’s potentially a double-edged sword as it will benefit buy-to-let investors as much as the first-time buyers it is trying to help. It is difficult at first glance to see how this measure will achieve the Chancellor’s stated aim of helping people get onto the property ladder.

“An increase to the annual charge for properties worth over £2m and owned by offshore companies is an easy vote winner. It very much falls into line with the Capital Gains Tax measures proposed last week to tax all non-residents on gains made on residential properties and removes any perceived advantage that non-resident investors had over UK investors.”

Paul Broadhead, head of mortgage policy at the BSA, said: “This is the year that the Chancellor has pulled a real rabbit out of the hat and gone for it on Stamp Duty. A progressive system of taxation for home purchase is far fairer. It will help individuals and families buy their own home, and smooth out the crazy tax jumps buyers have suffered around the top of each band.

“We have been calling for this reform for years and the best I was hoping for was a consultation. So the announcement of a fully worked through proposal, effective from midnight tonight was a massive but welcome surprise.

“The single disappointment was that the opportunity to raise the bottom £125,000 band up at least in line with inflation was not taken. That said, buyers, whether first timers or families moving into a larger home will benefit, whether they are in London or other parts of England, Wales or Northern Ireland. Scotland is included too until the end of March 2015.”

Payam Azadi, partner Niche Advice, said: “Great news for long-suffering homebuyers. The Chancellor has finally decided to look at Stamp Duty rates and has actually come up with something that works for most people.

“Until there is sufficient time for calculators to be built please find below a chart of the new stamp duty rates that will apply.”

Guy Ellison, head of UK equities at Investec Wealth and Investment, said: “The introduction of marginal rates of Stamp Duty changes will benefit the majority though those at the top-end of the market will see a higher tax burden.

“From a market perspective this could weigh on the London-centric house builders and estate agents, for example Berkeley and Foxtons, whilst potentially favouring the more regional developers.”

Simon Tyler, managing director of Tyler Mortgage Management, said: “The top end of the market is getting absolutely whacked by this new system. I don’t suppose many people will have much sympathy but it will be a kick in the guts for people who are stretching to borrow to buy that multi-million pound house and will doubtless dampen demand at the top end as people reconsider the economics of moving compared to improving or expanding their existing home instead.”

Charles Haresnape, managing director, mortgages and commercial lending at Aldermore Bank, said: “This is a very positive move, particularly for buyers, which I welcome and it is likely to keep the demand for housing on an upward trajectory despite the slight dampening in the market recently. The changes apply from midnight tonight which means that homeowners will instantly benefit from these reforms. For example, a Help to Buy customer will save £650 under the new reforms if they buy a £185,000 property.”

For the full Autumn Statement, click HERE.

 

 

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