Island Life Magazine Ltd February/March 2015 | Page 115

Roach Pittis advice By Ian Bradshaw Roach Pittis Solicitors, 60 - 66 Lugley Street, Newport, PO30 5EU 01983 524431 [email protected] Stamp duty rules I n last year’s Autumn Statement the Chancellor announced changes to the way Stamp Duty Land Tax (SDLT) was levied on residential house purchases. The changes that took effect from December 4, 2014 mean that individuals who purchase residential property now are increasingly likely to pay less tax under the new regime than under the old rules, provided they are purchasing for less than £937,500 which is the tipping point for it being more expensive. From December 4 an individual purchasing a house for £200,000 would pay £1,500 SDLT. The same individual if buying the house at the same price under the old rules would be paying £2,000. Under the old rules SDLT was charged on the total value of the property at a fixed rate. For residential properties bought by an individual up to the value of £125,000 no tax was paid. For properties bought at between £125,001 to £250,000, one per cent of the purchase price was levied, between £250,001 to £500,000 three per cent of the purchase price and for properties bought between £500,001 to £1,000,000 four per cent. Under the old rules therefore a purchase at £350,000 fell into the three per cent bracket, resulting in £10,500 SDLT payable. Under the new rules the tax payable depends upon how much of the purchase price is payable within each tax rate band. In other words fixed rates were abolished in favour of a tapered scale. The new rates are as follows; The first £125,000 on all residential purchases by an individual is zero rated meaning no tax payable. Between £125,001 to £250,000 tax is charged at two per cent; over £250,000 to £925,000 five per cent and over £925,000 to £1,500,000 is 10 per cent. Finally everything over £1,500,000 is 12% Accordingly in our example of a purchase at £350,000 SDLT would be calculated as follows; First £125,000 – zero rated = no tax. Next £125,000 – two per cent rated = £2,500. Final £50,000 – five per cent rated = £2,500. Total £5,000. This means there is a total tax bill of £5,000 representing a saving of £5,500 from the old tax calculation. The alteration made has prevented the situation that arose under the old rules that meant a purchase at £125,000 incurred no tax whereas a purchase at £126,000 incurred a fixed rate one per cent charge meaning a £1,260 tax bill. Tax is now levied on the portion of the purchase price that falls within the relevant band; in short the result of this is that the majority of people now pay less tax meaning it is easier financially to purchase a property. It should be noted that different rules apply for commercial property and purchases by companies. www.visitilife.com 115