In its Autumn Statement today the government has announced a reform to Stamp Duty Land Tax on residential property transactions. The reform will apply to residential property purchases throughout the UK and will apply to property purchases in Scotland until Land and Buildings Transactions Tax (LBTT) replaces SDLT for transactions from 1 April 2015.

The government has set out a series of new SDLT rates that apply to different property value bands.

From 4 December each SDLT rate will be payable on the portion of the property value which falls within each band rather than the current position whereby SDLT is payable at one rate on the entire value of the property.

New SDLT rates

Purchase price of property Rate paid on part of price within each band
Up to £125,000 0%
Over £125,000 and up to £250,000 2%
Over £250,000 and up to £925,000 5%
Over £925,000 and up to £1,500,000 10%
Over £1,500,000 12%

Example of how the tax due under the new rules will be calculated

The SDLT due on the purchase of a residential property for £376,000 where contracts exchange on 5 December 2014 with completion expected to be in February 2015 will be calculated as follows:

0% on the first £125,000 = £0
2% on the next £125,000 = £2,500
5% on the final £126,000 = £6,300
Total SDLT payable = £8,800

The transition phase

Purchasers of residential property who exchange contracts for purchase before 4 December 2014 can choose whether to apply the new rules or the old rules for the payment of SDLT.

The new rules favour purchasers of property under £937,510 resulting in a lower SDLT liability, however purchasers of property worth £937,510 and over will be liable to pay more SDLT under the new rules. Inevitably those purchasers exchanging contracts today and tomorrow will select the rules they use accordingly.

The government has suggested that the rationale behind the changes, which intend to cut SDLT for 98% of people who pay it, is to make the rules fairer and more efficient.

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Mark Traynor


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Rebecca Rider


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Posted on 04/12/2014 in Legal Updates

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