Stamp duty budget changes

Stamp Duty Reform: saving money on property purchases

In his Autumn Statement, the Chancellor announced the reform of Stamp duty on residential properties under £937,500, hoping to make the tax fairer for homebuyers, with immediate effect. As a result of the reform, according to the Treasury, 98% of homebuyers will enjoy a tax cut worth £800 million a year.

How to calculate which Stamp duty rule to use

• If you exchanged contracts on or before 4 December, but are due to complete on or after that date, then you can choose between whether to use the old or the new rules;
• If you exchanged and completed the sale of the property after 4 December you must pay Stamp duty under the new rules;
• If you completed the purchase of your property on or before 3 December 2014, but did not file your Stamp duty return, then you must pay stamp duty under the old rules.

Examples

Exchanged before 4/12/14

You exchanged on your £275,000 property on 2 December 2014 and can therefore choose whether to pay Stamp duty under the old rule or the new rule. Under the old rule, you pay 1% on the entire price of the property, which is £8,250; under the new rules, which work very much like the income tax system, you pay nothing on the first £125,000 and then pay duty at 2% on the remaining £150,000. This means that for the same £275,000 property you pay £3,750 in Stamp duty, making a tax saving of £4,500.

Completed before 3/12/14

You completed the purchase of your property for £275,000 on 3 December 2014, but did not file your Stamp duty return before 4/12/14. This means you must pay stamp duty under the old rules of £8,250.

Paying Stamp duty

You should file a Stamp duty return and pay what you owe within 30 days of completing the sale of your property.

You should still submit a return even if you do not owe anything in Stamp duty, unless you bought the property for less than £40,000.

On receipt of a valid Stamp duty return, HMRC issues a certificate so that you can register the title of your property with the Land Registry.

If you have any questions about stamp duty, filing a return, or how to maximise your tax saving, please get in touch with your account manager.

About the author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.