As announced in the Chancellor’s Autumn Statement today, residential stamp duty land tax is to be reformed. The single-slab rate is to be abolished, and instead stamp duty will be levied at a more gradual rate.  The rate for more expensive properties will increase substantially.  Each tax rate will apply only to the part of the property price within each band, not the whole value of the property, as is currently the case.  There will be winners for buying of lower value properties, but losers for those acquiring higher value properties.  For example, a buyer of a £2m house will pay £153,750 stamp duty land tax under the new rules as against £140,000 today.

Please note, this reform does not affect commercial properties.  Also, the rule that a purchase of six or more residential units is treated as a commercial transaction, remains unchanged.

There is more bad news in the Autumn Statement for owners of high value properties in that the Chancellor proposes that the rate of increase in the annual charge to tax on enveloped dwellings will go up to 50% more than inflation from 2015.

New rates of residential stamp duty land tax

Click here to view table.

When do the new rules come into effect?

The new rules start on 4 December 2014, but if you’ve already exchanged contracts on a property you’ll have a choice about whether to use the new rules or the old rules

Completing your sale on and after 4 December 2014

If you exchange and complete (or in Scotland, settle) your purchase on or after 4 December, you will pay stamp duty land tax under the new rules.  (For Scottish transactions, Land and Buildings Transaction Tax (“LBTT”) will apply after March 2015.  The scheme of LBTT is broadly similar, but the rates will differ).  Please click here to view our ScotNext page for further information on LBTT.

Completing your sale before 4 December 2014

If you completed your purchase on or before 3 December 2014, but have not yet filed a stamp duty land tax return, you will pay stamp duty land tax under the old rules

Exchanged your contract on or before 4 December 2014

If you exchanged contracts (or in Scotland, concluded missives) before 4 December 2014, but are to complete on or after that date, you will be able to choose whether the old or new rules apply.

The process of filing stamp duty land tax returns remains the same.