Stamp duty on both residential and commercial property has been frozen at 1%, 3% and 4% depending on a property’s purchase price.
But SPF argues that these banded rates are hindering sales of properties valued at around the banding levels, particularly the £250,000 band at which stamp duty jumps from 1% to 3%.
Simon Jones, director at Savills Private Finance, says:
“The unfairness arises when a property falls just inside a higher rate band, particularly evident when a property is purchased around £250,000. Someone who buys at £250,000 pays 1%, or £2,500, but someone who buys at £255,000 pays 3%, £7,650 – a huge jump.”
Of every 100 mortgages completed by SPF on properties valued at between £250,000 and £260,000, only one is for a property over £250,000.
Jones continues: “People whose properties are valued at just above £250,000, for example, are finding it very difficult to sell because buyers just don’t want to pay the huge stamp duty which is incurred above this level. Fairer treatment would be to introduce a tiered rate so that you only pay the higher level of stamp duty on the amount above the threshold. This would be a significant saving for the individual and I suspect, given the average house price of £100,000 or so, a fairly small dent in the Chancellor’s coffers.”
For example:
If I buy a house for £750,000, then I pay 4% on the whole amount. At 4% on £750,000 I pay £30,000 in stamp duty.
But if tiered banding was introduced - namely 0% on amounts of the asking price up to £60k, 1% up to £250,000, 3% to £500,000 and 4% over £500,000, and I pay stamp duty in a similar way to income tax, then I would only pay £19,400.
