Sellers and buyers alike could benefit from UK property tax changes

Sellers and buyers alike could benefit from UK property tax changes

Whenever reforms are made to the way property in the UK is taxed, it is normally to the advantage of either buyers or sellers. However, in the latest governmental autumn statement, we've actually seen changes that benefit both sides of the coin, with these alterations being welcomed widely. 

On Wednesday (December 3rd), chancellor George Osborne stood up in parliament and announced an end to the archaic bandings for stamp duty, which see people only having to pay tax on the portion of a property's value above a certain threshold, as opposed to the whole thing, as it was in the past.

So how does it benefit sellers and buyers?


The effect of this change to stamp duty for buyers is pretty much obvious. In the past, stamp duty has been one of the biggest barriers to home purchases, so bringing it down can only be of benefit to people looking to get onto the property ladder. It's one of the reasons the two year stamp duty holiday, which the last Labour government brought in, was heralded as being a lifeline for the property market. 

Under the new regulations, the big bonus for buyers is that they only pay certain levels of tax on the portion of their property that costs more than the cut-off point. The new tax bands are zero per cent on homes up to £125,000, two per cent up to £250,000, five per cent up to £925,000, ten per cent up to £1.5 million and 12 per cent above this. 

For someone buying a home that cost £300,000, the previous rules would have seen them have to pay a bill of £9,000 for stamp duty. However, these modern changes means that they will save £4,000. 

Rather than paying a full block amount for the fact that their home costs £300,000, a buyer would now pay zero per cent for the first £125,000, two percent for the band £125,000 to £250,000, which works out at £2,500, and then five per cent on the remaining £50,000, which works out at £2,500, giving them a total bill of £5,000. 

For many, this saving could be the difference between being able to buy a home and having to wait to get on the ladder. 

"The new, graduated Stamp Duty system is a long overdue overhaul to what the Chancellor admitted was a poorly designed tax and represents a fairer system for the vast majority of home buyers," said Lawrence Hall of Zoopla.


Surprisingly, it's not just buyers that are going to benefit from these changes, with sellers also likely to see a positive knock-on effect. 

According to Zoopla, under the older rules, many people were having to discount the value of their home in order to get a sale. For example, someone who was buying a property that should cost them £260,000 might try to push the price down to £249,999 so they can sneak under the limit for a higher stamp duty band. 

The fact that the chancellor's new rules mean buyers will pay less should mean that more are prepared to pay the full price that a property is worth, which obviously is of great benefit to sellers. 

"It also means that those selling their home at certain levels are more likely to achieve the real value of their homes and won’t be forced to discount their properties to sneak under certain bands," Mr Hall added. 

There is, of course, also a positive for the property sector as a whole. When we have more people able to get a good price for their home, and more buyers around, the chances are that an increased number of properties will come onto the market, which could help to address the supply and demand issue in the long term.