Simon Read: The Chancellor has stamped on an unfair tax. But will the delight of homebuyers mean misery for others?


Simon Read
Saturday 06 December 2014 01:00

Were you surprised by the sudden reform of the rules for stamp duty on property purchases? I certainly was. I've been calling for ages for a change in the tax to make it more fair – and, at a stroke, George Osborne did just that on Wednesday in his Autumn Statement.

To remind you, he has scrapped the old "slab system" where homebuyers paid the highest-rate tax on the whole amount. That's been replaced with a way of charging that is similar to income tax and, in my view, much fairer. In short, homebuyers will now only pay tax, or a higher rate of tax, on sums above a certain threshold.

As an example, anyone buying a home under the old regime for £185,000 would have paid 1 per cent on the full amount, working out at £1,850. Now they will pay nothing on the first £125,000 and 2 per cent on the remaining £60,000, which works out at £1,200, or a saving of £650.

The change means stamp duty will be cut for 98 per cent of homebuyers, according to Mr Osborne. He also said that only homes costing more than £937,000 will pay more stamp duty under the new system than they did under the old.

In other words, the news was good for first-time buyers and those purchasing average-priced homes, but annoying for those buying upmarket. You might think that was an odd thing for a Conservative Chancellor to do, but that would only be if you had forgotten that there's a general election next May.

Will the move be a vote-winner? As I said earlier, Mr Osborne has made the tax much fairer; It's a common-sense move rather than a tax giveaway. However, I would hope that most of us remain cautious about Tory plans for the future.

After the news was announced on Wednesday, I spoke to a few people who were more or less directly affected. One friend completed their home purchase a couple of weeks ago and was understandably rueful about the few thousand that could have been saved had they delayed the transaction.

Marie de Freitas had the opposite reaction and will now be £3,800 better off (see the full story on the below). But with a pleasing sense of cynicism, she told me she expects to be stung elsewhere by the Government to make up for the windfall that she enjoyed this week.

Marie de Freitas, 30: We've saved £3,800

My partner Mike and I are buying our first house together and hope to exchange next week. We're paying £310,000 for a three-bed home in Bishop's Stortford, Hertfordshire, and have pushed our finances to the limit. While we both work in London – I'm in hospitality and Mike is a jazz pianist – we've been completely priced out of the Capital. So the news about stamp duty this week has been fantastic.

I reckon we'll save £3,800 on the tax, which, coincidentally, is about what we need to replace the 20-year-old boiler in the property. It was a very welcome piece of news but we're sceptical that where we've gained this week, we'll end up losing the money elsewhere in tax."

twitter: @simonnread

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