The changes, which were announced at this year’s Autumn Statement involve the introduction of a tiered taxation system based on the value of a property.
Advisers said many clients will benefit from the move, which could create a more buoyant housing market and also help first-time buyers onto the property ladder.
The new system dictates that instead of paying 1% tax on a £250,000 home and 3% on one costing £250,001, buyers will now be levied according to a five tier system.
No tax is payable on the first £125,000 of the purchase price; 2% on amounts up to £250,000; then 5% up to £925,000, 10% up to £1.5m and 12% on everything else.
The Chancellor said stamp duty will be “cut for the 98% of homebuyers who pay it”.
Treasury figures show those buying houses worth £510,000 will be the biggest winners. Those buying ‘mansions’ worth more than £937,000 will pay more tax than they are now.
The changes took effect on the first day following the announcement on 3 December.
Ingenious changes
Aurora Financial Solutions IFA Daren O’Brien said the changes are “ingenious” as they make it cheaper for those people at the lower end trying to get on the property market, and penalise the ones on the top.
He said: “At first it sounded like everyone above £250,000 was being taxed 5% but after looking at it more closely it looks like a good thing.
“We weren’t expecting them to do anything about this, or if anything just small tweaks.
“We are quite pleased with what’s happened and it should make it a potentially buoyant housing market next summer after the pension reforms. We’ve got clients who are looking to buy and this will cement it for them.”
Dobson and Hodge financial services director Paul Stocks suggested the new system will help iron out practices of trying to ‘dodge’ the old system.
“When you’ve got over that threshold and [get charged a lot more tax all of a sudden] it creates an artificial avoidance system,” he said, “people work around that barrier and start to dodge it.”
For instance, he suggested a void was created above the £250,000 mark, the threshhold for the higher tax charge, where houses were priced a lot higher to “justify the higher tax”.
“Having a tiered system removes those creases in the system. Simplicity is good in financial services,” he said.
Rowley Turton financial planner Scott Gallacher agreed. “It’s a great thing for people. I can’t believe they haven’t done this earlier,” he said.
Electioneering
The only downside, Gallacher suggested, is it appeared to be ‘electioneering’ to give away a tax break while continuing to reduce the deficit.
“For most people it’s a tax cut, I’m not sure where he got the money from.”
Gallacher also suggested the government should have offered people both options until the switchover to the new system to avoid delays in house sales ahead of the change.
Gallagher said he has clients who are due to sell their £327,000 home in mid-December. They are expecting to save around £3,500 in tax on the sale, which would have cost them around £10,000 in the old system but works out around £6,500 under new rules.
Mackenzie Financial Planning director Jane Holt said the change will help fuel “a growing optimism in the ongoing economic recovery” among her firm’s, mostly retired, clients.
Partner at GEM Financial Services Gareth Rees said the new tax structure will “end the much mooted and ill thought out mansion tax which brought uncertainty to an already sluggish housing market.”
“The removal of the slab structure will provide fresh impetus to sales of properties under £1m and provide a more equitable system for the vast majority of house buyers,” he added.
