An increase in the threshold for stamp duty land tax (SDLT) on residential properties was widely predicted ahead of the March 2005 Budget. The Chancellor did not disappoint. He doubled the threshold from £60,000 to £120,000.Estimates as to the number of homeowners who will benefit vary, but over 150,000 first time buyers and around 240,000 homebuyers in total will be taken out of the SDLT net. What is it they say about statistics?….
The fact remains that the SDLT threshold would now stand at over £150,000 if it had been increased in line with house prices since March 1993 when it was last increased.
A purchaser paying £100,000 for a property will save £1,000 as a result of the change. Previously there would have been an SDLT charge at 1% on the full £100,000. But is it a real saving? Where there is strong competition amongst first time buyers the SDLT ‘saving’ might simply serve to push up property prices. Furthermore with the average house price for the first time buyer standing at over £140,000 there will still be some liable to SDLT. Of course those buying more expensive properties will continue to find themselves liable to SDLT on the full price paid at 1% (between £120,001 and £250,000), at 3% (between £250,001 and £500,000) and at 4% (over £500,000).
Purchasers of residential property in one of the UK’s designated ‘disadvantaged areas’, of which there are nearly 2,000, will continue to benefit from a £150,000 threshold.
The sting in the tail is reserved for purchasers of non-residential property in disadvantaged areas. Up until 16 March 2005 there was total exemption from SDLT on such purchases whatever the price. The exemption was withdrawn without warning with effect from 17 March 2005. Any commercial property transaction over £150,000 in a disadvantaged area now attracts SDLT at normal rates.