Progressive change to SDLT from 4th December 2014

Written by Gavin Stebbing on 4 December 2014

The Chancellor delivered some festive cheer in his Autumn Statement to purchasers of lower value residential property, by announcing a fundamental change to the Stamp Duty Land Tax ("SDLT") charge. Note that the changes only apply to residential property – SDLT on commercial property remains unaffected.

From 4th December 2014, SDLT will be charged at progressive rates, in the same way as income tax, rather than on the entire purchase price. The old system produced some real anomalies – for example a house costing £250,000 would incur a 1% SDLT charge of £2,500, whereas a purchase price of just £1 more would incur a 3% charge on the whole purchase price amounting to £7,500; a quite extraordinary tax increase of £5,000 for just a £1 increase in the purchase price.

The new system will see a SDLT rate of 0% on the first £125,000 of the purchase price, then 2% on the band between £125,000 and £250,000, 5% on the band between £250,000 and £925,000, 10% on the band between £925,000 and £1.5mn and 12% on anything in excess of £1.5mn.

This new progressive system of charging will see savings for most properties costing under £1.125mn, particularly so if the purchase price is just above one of the old band thresholds of £250,000, £500,000 or £1mn. But there will be an increase in the SDLT charge for houses sold at a price between £937,500 and £1mn and for all those sold for more than £1.125mn; and the higher the value of the property, the greater the increase. A house costing £5mn will see a 46.8% increase in the SDLT charge.

A comparison of the new amounts payable compared to the old amounts payable at various purchase prices is illustrated in the table below.