The Chancellor’s decision to do away with the incumbent ‘slab’ system and introduce a more reasonable ‘progressive’ tax rate has given new hope to many first time buyers and those at the bottom of the domestic property ladder. Where the old slab system led to sudden jumps in the SDLT at each threshold level, the new system lets the SDLT be calculated at different rates depending on the portion of the purchase price that falls within each rate band.
Let’s explain this in simple terms.
Under the old system, if you purchased a property at £300,000, you paid a 3% SDLT on the entire purchase price, which would amount to £9,000. You would have missed the next lower tax band of only 1% by £50,001.
There are no such ‘near misses’ under the new system, and your SDLT is progressive:
0% on the first £125,000= £0
2% on the next £125,000 = £2,500
5% on the final £50,000= £2,500
So you only pay £5,000 overall.
The new purchase price bands for the domestic SDLT stand as follows:
Purchase price bands (£) SDLT Percentage rate (%)
Up to 125,000 0
Above 125,000 and up to 250,000 2
Above 250,000 and up to 925,000 5
Above 925,000 and up to 1,500,000 10
Above 1,500,000+ 12
These new rates mean that while there are savings to be made on the purchase of lower priced housing, buyers of high end properties will now end up paying a huge premium – as much as 12% for properties worth over £1.5 million.
Instances when one pays more than 12% SDLT include the following:
- When a company buys a property for its Director to live in, the SDLT owed is 15%
- All non-natural buyers of UK residential properties also pay 15% SDLT if the value of their property is above £500,000. In certain instances, they can apply for relief.
The tax remains unchanged for commercial properties and mixed properties still come under the old regime.