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Chancellor reveals major SDLT reform

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3rd Dec 2014
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Chancellor George Osborne has announced a reform of stamp duty land tax (SDLT) in his Autumn Statement today.

The reform on residential property transactions will take effect from 4 December - and will according to Osborne cut SDLT for 98% of those who pay the "tax on aspiration".

Now, each new SDLT rate will only be payable on the portion of the property value which falls within each band, rather than tax being due at one rate on the entire value.

There are now also new rates and rate bands for these transactions. 

Where contracts have been exchanged before 4 December but complete on or after that date, the purchaser can choose whether to pay tax under the old or the new rules. 

Those purchasing a property for less than £937,500 will pay less or the same SDLT under the new rules. The changes will eliminate the ‘cliff edge’ increases in SDLT liability which occurred under the old rules, and so reduce pricing distortions which occurred around the previous thresholds. 

House buyers will pay 0% on the first £125,000. Thereafter it is 2% on the portion up to £250,000, 5% up to £925,000, 10% up to £1.5m and 12% on anything above that.

Anyone due to exchange contracts in the next day can bring this forward to today to benefit from the old rules without it being treated as tax avoidance. 

Chris Sanger, EY’s head of tax policy said he thought the reform "will see a marginal rate of 12% for those with properties worth over £1.5m, which may well be a real disincentive for those looking to move house and put a dampener on demand.”

new SDLT calculator is available, which works out the SDLT taxpayers will have to pay for residential purchases, including lease premium, using the new rules. It also shows how much SDLT is due under the previous rules and for non-residential purchases.

The reform will apply in Scotland until Land and Buildings Transaction Tax (LBTT) replaces SDLT in April 2015. More information is available in this guidance note.

In addition, the draft legislation is available here.

Replies (5)

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By Justin Bryant
04th Dec 2014 10:50

Gideon

Has gone too far this time. If he had stuck to my recommendation in the link below then SDLT receipts would have probably increased. As it is, imposing 12% SDLT will kill the c£2m+ market and supress transactions (and encourage simple and legitimate avoidance that all SDLT advisers know about). As for the lower end SDLT decreases, this "saving" will go into the pockets of £250k and £500k sellers and other sellers over the course of a year or so in price increases. SDLT receipts are currently £1bn a month and I predict these will drop to nearer £800m a month within the next 9 months - costing c£2bn a year. https://www.accountingweb.co.uk/article/miliband-pledges-25bn-tax-packag...

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By Justin Bryant
27th Feb 2015 14:15

Looks like my prediction was right
As also noted in this week's Tax Journal. See:
https://www.gov.uk/government/statistics/hmrc-tax-and-nics-receipts-for-...

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By Justin Bryant
20th Mar 2015 13:15

Looks like my prediction was wrong (overly optimistic)
As monthly SDLT receipts are down over 30% from recent highs already. See:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/fil...

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By Justin Bryant
23rd Apr 2015 10:20

SDLT receipts still down around 30%
See:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/fil...

Gideon's decision to both reduce and increase SDLT rates has caused a loss of tax revenue higher than the mansion tax is expected to raise. I am surprised this is not being reported more widely.

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By Justin Bryant
07th Aug 2015 09:58

"It was a very, very bad move"

Yes indeed. See:

http://www.bloomberg.com/news/articles/2015-08-07/taxed-out-of-mansions-...

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