the stamp duty reforms that came into effect in December were welcomed by the vast majority of UK homebuyers, most of whom stood to seriously benefit from the changes. By all accounts, they have done – figures show that an impressive £701m in stamp duty has been saved in the six months since the changes came into force!
According to research from conveyancing service provider myhomemove, the changes to stamp duty have cut the tax for 98% of those purchasing homes worth less than £937,000, and the savings have been marked. Their calculations show that the average buyer has saved £1,400 per house purchase – just think of what you could do with that kind of cash when buying a home!
First-time buyers stand to benefit even more, as they're the ones who could truly put that extra £1,400 to good use. It means they'll be able to save more for a deposit and can put that extra money straight into their new home, something that could have long-term benefits in the form of a smaller mortgage balance and lower rates.
"The stamp duty reforms have saved UK home buyers a significant amount of money and provided an important boost to the property market, just as house transactions were starting to slow down in the run-up to the general election," said Doug Crawford, CEO of myhomemove. "The changes have a particularly positive impact on those struggling the most to get onto the property ladder, first-time-buyers, as they can now save more money towards a deposit for their purchase."
The changes couldn't have come at a better time, particularly with house prices making it even more difficult for many to get on, or move up, the housing ladder. But just what's changed? Well, two key things have been amended – the rate of SDLT (stamp duty land tax) for certain property values, and how the tax is worked out.
Under the previous system, stamp duty had more of a "cliff edge" arrangement. If the value of your home hit a certain limit, you'd pay the higher rate of tax on the full value of your property, not just the amount above the threshold – so if you bought a home worth £250,499, you'd be stuck with a rate of 3% for the whole lot. This was widely criticised as it meant people were typically left with unwelcome bills, and it also meant there were often sneaky tricks used to try and buy a home worth less than the threshold (people would pay separately for fixtures and fittings, for example, particularly at the higher tax bands). Now, that's changed.
Happily, stamp duty has been changed to a far more proportionate arrangement. The rates for some bands may be higher, but you'll only pay the higher rate on the amount of the property that's above the limit, not the whole price! So, in our previous example of a home worth £250,499, you'd pay 2% on the value up to £250,000 and 5% on the rest. As you can imagine, the savings can be marked!
"Under the old 'slab' system, there was a substantial increase in price at the stamp duty thresholds," added Crawford. "[However], the reforms have reduced this significantly, leading to greater movement up the property ladder and enabling homeowners to aspire to own properties that would have previously been unobtainable."
There are bound to be some people who are worse off, but these are a very small minority. Overall, the outcome has been incredibly positive – find out more about how much you could save here, and if you're benefiting from the changes and want to make the first (or next) move, check out our mortgage best buys. Thanks to rates being at record lows, you could save even more!
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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