Reforms to Stamp Duty Land Tax which kicked in at midnight caused mayhem in much of the market yesterday.
Almost before George Osborne had sat down, the announcement triggered an intense wave of activity at estate agents, lawyers and accountants – with deals, particularly in London, being hurried through to exchange before the clock struck twelve. Buyers of properties priced at between £1.5m and £2m had up to an extra £53,750 at stake – a rise of 54% on their anticipated bills.
There were tales of advisers hauling their clients off golf courses to get exchanges through, said the BBC last night.
But agents everywhere yesterday afternoon reported a surge of calls from buyers at all levels wanting to know what the reforms meant for them.
The downright winners are those paying less than £937,500 who were handed an early Christmas present if they are exchanging this week. However, there could also be winners who have exchanged but not yet completed.
The losers are those paying more. It was those potential losers and their advisers who were yesterday pressing for exchange by midnight.
Buyers exchanging before then, regardless of when they complete or how much they are paying, can choose to pay SDLT at either the old or new rate.
From today, the new rates apply on all exchanges.
One London agent, Haus Properties, was among those burning the midnight oil.
Jamie Lester, who heads up the business, said yesterday afternoon: “We were due to exchange on a £2m property this week and the buyer is now pushing to do this today.
“I expect a lot of lawyers will be working late into tonight to exchange on sales between £1.5m and £2m.”
However, other losers are buyers of more ordinary-priced properties who have only just completed – typically last Friday, as the last Friday of a month is the busiest for completions.
One conveyancing firm, Blacks Connect – also inundated with calls yesterday afternoon – said of recent purchasers: “Most will have lost out.”
However, yesterday agents were also busy liaising on deals where there have been exchanges but not completions – and where, under the ‘midnight’ rules, the buyer can now choose to pay less SDLT.
Announcement of the new SDLT regime sent a particular shock wave through the London market as agents and buyers reached for their calculators.
For example, the purchaser of a £1.9m property would have paid £95,000 under the old structure. Under the new rules, they will be paying £141,750.
In prime parts of London, said Peter Rollings of Marsh & Parsons, 56% of property is worth £1m or more.
Another agent, Cluttons, said that in Clapham, someone buying a two-bed flat would be £18,750 better off, but someone buying the same type of property in Chelsea will be £35,000 worse off.
Liz Peace, of the British Property Federation, said: “A little bit more notice would have been helpful as the sector will have had to get to grips with the changes by midnight. The rapid speed of implementation no doubt reflected any rapid moves to avoid paying.”
At a glance:
The old ‘slab’ system:
0% on properties up to £125,000
1% on properties from £125,001 to £250,000
3% on values between £250,001 and £500,000
4% on properties between £500,001 and £1m
5% on properties between £1m and £2m
7% on properties above £2m
The new system:
No SDLT payable at all on properties up to £125,000
The first £125,000 on properties to be free of SDLT
Then payable at 2% payable on the portion up to £250,000
Payable at 5% on the portion up to £925,000
Payable at 10% on the portion up to £1.5m
Then payable at 12% on the portion over that amount.
There is a very helpful HMRC calculator here
There is more on the changes on the Government website
Comments (12)
About time! More warning would have been good though, I found out it had been done by chance…. The same as I did with the abolishment of HIPs come to think of it……..
We found out from Property Industry Eye first, from their very prompt email.
I wasn't at work, spotted it on Facebook!
At last what we have all been going on about for donkey's years has come to fruition! For those of us working in the real world (i.e. not in London) it is exactly what our market needs. At lunchtime yesterday, after brisk bidding I knocked a property down at auction for over £300,000. The successful bidder paid way above guide price and now has an unexpected £4,000 refund on his investment! With average prices in our market at around £250,000 – £300,000 there are massive savings for purchasers which should at last increase the level of transactions which are still considerably below twenty-first century averages. The Chancellor will reap the benefit and so will we.
I would agree Richard. If stamp duty had not changed I would have expected little money to be paid into the Exchequer via stamp duty between now and the General Election. Now it is totally a different ball game.
I agreed a sale yesterday afternoon because there was a saving of nearly £3500 to be had – the vendor got and extra £1000 and the buyer saved nearly £2500 this would appear to be win-win !
"… this would appear to be win-win !" With YOUR CLIENT being the losing winner, it appears…
I never thought I would say this, but today I like chancellor. A sale at £1.7m which had been floundering due to misplaced egos and arrogance was suddenly brought under control yesterday and exchanged at 1810. First time I have ever been able to get a solicitor to answer a phone after 1700!
Well spotted MA Machine on.
At long last in the North and most parts of the country property sellers will not find their properties undermined by stamp duty as soon as the price goes over £250,000. Already on behalf of a client I have increased an offer on a property because the new stamp duty would now allow them to pay more and still be better off and perhaps now seal the deal. The person they are buying from is also better off on their purchase, therefore providing that necessary wiggle room to generate a successful sale.
Hi there YA – long time no chat! "Already on behalf of a client I have increased an offer on a property because the new stamp duty would now allow them to pay more and still be better off…" Care to share how much they increased by?
PeeBee. Offer increased from £262,500 to £265,000. Both parties still being better off and sharing the benefit in the stamp duty reduction. I must say deal still not done.