Stamp duty cut: How much will you pay after the mini-Budget change?

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Chancellor Kwasi Kwarteng today announced a cut in stamp duty to address a major hurdle for some home buyers.

The threshold for stamp duty will be immediately and permanently doubled from £125,000 to £250,000, but the rates will not change.

For someone who buys an average home of $270,000, that means their bill will be reduced from $3,500 to $1,000.

New buyers will see their exemption level rise from £300,000 to £425,000 and pay no stamp duty up to that level.

However, many home buyers may be disappointed as the decision to change the threshold, but not the rates, will only save most £2,500.

STAMP DUTY UNDER THE OLD SYSTEM
Band Existing residential SDLT rates Extra rates for hosts
£0 – £125k 0% 3%
£125,001 – £250k 2% 5%
£250,001 – £925k 5% 8%
£925.001 – £1.5m 10% 13%
£1.5 million + 12% 15%
* No stamp duty is paid on property transactions costing less than £40,000 as these are considered low value and not reported to HMRC

The move into the so-called mini-Budget is a cut in one of Britain’s least favored taxes, which has a much greater impact on some buyers than others.

While first-time buyers get a stamp duty exemption and people who buy a home worth an average of £270,000 have to pay bills of around £3,500, people buying single-family homes in more expensive areas can get bills in the tens of thousands of pounds.

How much stamp duty would you pay now?

Average £270,000 house: £1,000 – Save £2,500

£350,000 house: £7,500 – Save £2,500

£450,000 house: £10,000 – Save £2,500

£500,000 house: £12,500 – Save £2,500

£750,000 house: £25,000 – Save £2,500

£1,000,000 house: £41,250 – Save £2,500

How stamp duty works

Stamp duty is levied on the purchase price of a home and is levied at various rates above the thresholds.

Initial buyers had a stamp duty exemption of up to £300,000, which has now been increased to £425,000.

Previously stamp duty started above a threshold of £125,000 at 2 per cent and then rose to 5 per cent above £250,000

Now the first £250,000 is tax free and amounts above that are charged at 5 per cent up to the 10 per cent threshold at £925,000.

The last major permanent stamp duty reform by George Osborne lowered bills lower on the price ladder for some homebuyers and removed cliff edges, but increased costs for those buying expensive homes.

Stamp duties will still remain significant for those buyers under the Kwasi Kwarteng discount, but they will see a £2500 reduction.

In April 2016, the stamp duty on sale-to-let and other additional properties was reformed, with the addition of a new 3 percent surcharge on all rates. This remains under the new higher threshold system.

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