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What do new stamp duty changes really mean for the average house buyer?
An estimated £4.5bn less will be paid in stamp duty across the UK over the next six years as a result of Chancellor George Osborne’s sweeping reforms to stamp duty, a move that has been welcomed by buyers and sellers alike, as well as the property industry. Describing the current stamp duty arrangements as a “badly designed tax on aspiration”, the new rules will see stamp duty cut for 98% of those that currently pay it.
Michael Boyd, Finance Director from Progressive Building Society welcomes the announcement and outlines what the changes really mean for Northern Ireland homebuyers.
Stamp duty land tax is a lump-sum tax that anyone buying a property or land costing more than a set amount has to pay. The rate you’ll pay the tax at varies based on the price and type of the property. The slab system, where you paid a single rate on the entire property price, has been swept away, to be replaced by a fairer more progressive system.
How did stamp duty work? As the price you pay for a new property increases, so do the rates of stamp duty. Under the old system, someone buying a home for £125,000 paid no tax, while someone buying a property for £125,001 paid 1 per cent (£1,250). Those buying a property for £250,000 had to pay 1 per cent in tax (£2,500), while buying a property for £250,001 would incur duty at 3 per cent (£7,500) on the whole sum.
What are the changes? Under the new system homebuyers will now only pay the proportion of the purchase price that’s actually above the thresholds at the higher rate, and not the highest rate on the total amount. 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 percentage up to £1.5 million and 12% on everything over that.
When will the changes take effect? The new system took effect immediately meaning homebuyers across Northern Ireland will benefit instantly. If you are in the process of purchasing a home, you now have the option of choosing the regime under which you wish to operate.
What does it mean for homebuyers in Northern Ireland? The regional breakdown for September 2014 showed that the average property price in Northern Ireland stands at £143,000. Homebuyers here are set to benefit from the new rules with a welcome saving of more than £1,000 for the average house purchase. In particular the move could be particularly beneficial to first-timers with the changes reducing the up-front costs for younger buyers.
Next Steps? Progressive Building Society welcomes the Chancellors decision. Moving to a more sensible scheme that works in much the same way as income tax means that many buyers will have more cash in their pocket. Our commitment is to make the process of applying for a mortgage as simple and as easy as possible. We recently launched our new mortgage guide which was reviewed and assessed by Plain English to provide a simpler more efficient document that customers and members can easily understand. With the new Mortgage Market Review changes introduced earlier this year and now the introduction of new stamp duty rules we would encourage anyone considering applying for a mortgage to call into one of our 12 branches where a qualified mortgage advisor is on hand to talk you through the process.
We’d love to talk you through the mortgage process and help you find a suitable product. For more information or to apply for an account, you can call us, email us, pop into one of our 11 branches. We look forward to hearing from you.