The UK government has changed the stamp duty rates in its Autumn budget statement. The changes, which are effective immediately, have drawn positive responses from most commentators and analysts. It certainly benefits buyers of lower valued properties and penalises buyers of properties valued at more than GBP937,500.
Under the new rules, no tax will be paid on the first £125,000 of a property, followed by 2% on the portion up to £250,000, 5% on the portion between £250,000 and £925,000, 10% on the next bit up to £1.5 million and 12% on everything over that.
It is estimated that around 750,000 buyers every year will benefit from the new rates. By contrast, the 17,000 buyers of properties valued at GBP925,000 plus will pay more. The new rates will have the greatest impact in London and the south-east, which are likely to contribute around 75% of all stamp duty receipts. The changes are unlikely to have a major impact on the central London market. Time has shown that buyers at the higher level will absorb additional costs and interest rate rises. It is hoped that the new rates will end all talk of a ‘mansion tax’ on such properties, although this remains to be seen.
The changes are designed to help first time home buyers and people at the lower end of the income scale. It is not often that a UK government makes changes to the tax regime which are universally praised. In this case, they have and with an election next year it is not difficult to be cynical in terms of the timing. Nevertheless, the changes will benefit a huge number of people and are to be applauded.
It is worth noting that given the cost of property in the UK, more and more buyers are focusing on smaller units at affordable prices. The dream home of a four bedroom, two bathroom house is rapidly moving beyond the reach of many buyers. The acceptance of reduced living space applies especially to younger buyers. Many of them don’t want to live on a large nondescript housing estate miles from a city centre. They want to live close to major shopping centres, bars and restaurants. Sacrificing space is often necessary if they are going to achieve this. The trend towards smaller, well located homes is set to grow for the foreseeable future and offers great opportunities for investors.