Coming into immediate effect, it means that, where stamp duty had been charged as a single percentage of the property price, it would now fall into clear bands, relative to the property price – 0% for properties under £125,000, 2% for £125,000-£250,000, 5% above £250,000. And crucially, you only pay for the proportion of the purchase price that comes in above that bracket. The new system is being hailed as a progressive move which will make homeownership more affordable and thus more accessible.
Cameron Ewer of Strutt & Parker in Cambridge said: “This is a surprising and decisive move from the government. If it means that there is no longer any need for a mansion tax, and it almost seems to make the case for it obsolete, then it also seems to be a largely positive move. It effectively replaces the need for an annual levy on properties above £2,000,000.
“It was almost universally recognised that our stamp duty system was out of date and in desperate need of modernisation. The old thresholds were acting like invisible barriers and making the market very sticky in places. Clearly those buying homes over the £1.1 million mark will pay more tax tomorrow than they will today. However, overall this new system will benefit the vast majority of the UK’s homebuyers.”
Jeremy Blackburn, Head of Policy at RICS (Royal Institution of Chartered Surveyors), says: “Finally we see long overdue reform to the stamp duty tax system – described by the Chancellor as the most damaging tax of all. Time and time again RICS has called for these changes to stamp duty structure, which now mean 98% of housebuyers will benefit.
“These changes reduce distortion and ensure those at the top end of the market contribute fairly, while those at the bottom will be given a fairer chance to get on the ladder.” Still, the news has caused some problems, namely the increased amount of property buyers now demanding last- minute reductions to their purchase price – a practice known as gazundering.
“In the short term, current ongoing transactions will be impacted. When any new tax is enforced this inevitably causes disruption,” explains Ewer. “However, keeping the status quo was an unlikely outcome. Making this change immediate was sensible as it leaves no room for speculation and will not cause any further uncertainty which has been so damaging to our housing market around taxation changes in recent years. In the long term this new system shouldn’t cause significant market disruption over an extended period of time.”