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Stamp Duty : What Will You Really Save?

This weeks Autumn Statement by Chancellor George Osborne revealed significant changes to the amount of Stamp Duty which it is claimed will reduce the amount payable for 98% for all homebuyers.

Here we summarise what it all means.

What is stamp duty?

Stamp duty, or Stamp Duty Land Tax (SDLT) is a payment levied on all purchases of property, including flats, houses, land and other buildings over a certain price.

Before

Under the previous system home buyers would pay stamp duty calculated on a fixed percentage as detailed below:-

Property price up to £125,000  tax free

Price between £125,000-£250,000  stamp duty of 1%

Price between £250,000-£500,000 stamp duty of 3%

Price between £500,000 £1m  stamp duty of 4%

Price between £1m to £2m  stamp duty of 5%

A stamp duty of 7% applied to all properties over £2m.

Under this system, if buyers paid just £1 over £250,000 they were required to pay stamp duty of 3% on the whole purchase price, a system which was often criticised.

After

With the changes to stamp duty announced in the Autumn Statement, home buyers now pay a fixed percentage of stamp duty on each portion of the property price.

The applicable charges for residential properties are now as follows

The first £125,000 of the property price,  tax free

Portion of price from £125,000-250,000  stamp duty of 2%.

From £250,000-£925,000  5%

From £925,000-£1.5m  10%

Portion of price over £1.5m  taxed at 12%.

Under this system buyers are no longer charged a higher rate on the total property price if they pay £250,001, for example.

What does it mean?

Here we haveve provided some illustrations of what these changes will mean in practice.

Property price £125,00 – no change (no stamp duty applicable)

Property price £185,000  previous charge £1,850; new charge £1,200  Total Saving £650

Property price £275,000  previous charge £8,250; new charge £3,750  Total Saving £4,500

Property price £510,000  previous charge £20,400; new charge £15,000  Total Saving £4,900

Property price £2.1m  previous charge £147,500; new charge £165,750– Total Loss £18,750

A stamp duty calculator is available on the government website.

https://www.gov.uk/stamp-duty-land-tax-rates

Early predictions suggest that house prices may rise in some areas where the cost of stamp duty will be lower but fall in regions where stamp duty will increase, typically in areas where house prices are highest.

What will this mean for the housing market?

As an overall guideline the Treasury stated that people purchasing a property for £275,000 (the price of an average family home) would save £4,500 in stamp duty. A purchase of £2.1m on the other hand will see stamp duty rise by £18,750.

While the period leading up to Christmas sees a traditional slowdown in the housing market, it is anticipated that 2015 will see an increase in prospective buyers.

When did these changes take effect?

The changes took place with effect from 3rd December.   For buyers who have exchanged contracts on a property but not yet completed, they will be allowed to select which rules to use.

The new rates of stamp duty will apply across the UK but will be replaced by the Land and Buildings Transaction Tax in Scotland from next April.

Thinking of selling your house? At Redstones we work hard to ensure a fast sale at the optimum price.  We also offer an online auction for property owners who need to sell quickly. Contact us today to discuss your options.

For more advice and guidance, see our previous blogs:-

Selling Your House? Get Your Timing Right

House Prices Are At An All Time High – Is It Time To Sell?

Redstones Property Management

Landlord Essentials : 7 Tips For Managing Your Empty Property

As a landlord there may be times when you find yourself in possession of a vacant property following the departure of a tenant. While it is not an ideal situation, there are a number of steps you can take to minimise your costs and ensure your property is secure until your next tenant arrives:-

Visit regularly : A number of signs advertise the fact that your property is empty including piles of unopened mail lying by the front door, a house in darkness and an overgrown garden, to name a few. Install electronic timers to switch your lights on at pre-set times and ensure all burglar alarms are working.  It is also advisable to check that bins are both empty and clean for security and hygiene reasons.

Inform your insurers : If your property is likely to be unoccupied for a number of weeks, keep your insurance company fully informed in case of any problems with break-ins or burst pipes. Comply fully with the requirements of your insurance policy, for example, make sure windows are locked and alarms are set. For property owners unhappy with their current insurance providers, Redstones Financial offers a range of independent financial services including house insurance for landlords.

Inform the council : Once the tenants have left a property, landlords become responsible for the payment of council tax.  Properties that are empty and unfurnished may be eligible for a discount for a short period of time but this is at the discretion of the individual council.

Transfer responsibility for utility bills : As a landlord you are now responsible for the payment of all utility bills so it is essential to take meter readings on the day the tenant leaves and transfer the bills into your name.  Once a new tenant moves in, utility bills become their responsibility and a further meter reading will need to be taken.

Carry out repairs : While your property is empty it presents an ideal opportunity to carry out minor repairs and ensure it is ‘fit for purpose’ by carrying out checks on your boiler and smoke alarms for example. Our previous article ‘Is Your Property Ready For Winter?’ provides more advice on your obligations as a landlord.

Turn off appliances : To minimise costs, turn off all of your gas and electrical appliances, including fridge-freezers and switch off plug sockets. While we would also normally advise landlords to turn off hot water and heating timers, the heating should not be left off during winter. A cold spell will leave your property vulnerable to burst pipes if it is switched off for a lengthy period.

For landlords who are away over the festive period, leaving a vacant property unattended is a cause for concern.  Redstones offers a fully property management service which gives our customers peace of mind that their properties are monitored and checked on a regular basis.  With our extensive database we also work quickly to ensure your property is occupied quickly following the departure of a tenant.

Contact us today to discuss the most suitable solution for your property management.