George Osborne has said stamp duty will be cut for 98% of homebuyers in his Autumn Statement to the Commons.
The chancellor said that from midnight the current system, where the amount owed jumps at certain price levels, would be replaced by a graduated rate, working in a similar way to income tax.
The new stamp duty rates will only apply to the part of the property price that falls within that band, so there will no longer be a huge jump in stamp duty, for instance, on a property costing £500,001.
Under the old rules the valuation could be influenced by stamp duty if it was in the region of a price break. For example property that may be worth £265,000 may be reduced to £250,000 because of the tax increase.
People currently in the process of purchasing a home could choose which regime to operate under, Mr Osborne said.
Under the new rules, no tax will be paid on the first £125,000 of a property, followed by 2% on the portion up to £250,000, 5% on the portion between £250,000 and £925,000, 10% on the next bit up to £1.5 million and 12% on everything over that.
Previous rates:
Purchase price/lease premium or transfer value
SDLT rate Up to £125,000 Zero
Over £125,000 to £250,000 1%
Over £250,000 to £500,000 3%
Over £500,000 to £1 million 4%
Over £1 million to £2 million 5%
Over £2 million 7%
New rates
Purchase price of property Rate of SDLT
–Up to £125,000 Zero
Over £125,000 – £250,000 2%
Over £250,000 – £925,000 5%
Over £925,000 – £1,500,000 10%
Over £1,500,000 12%
Example: A buyer exchanges contracts for the purchase of a house for £275,000 on 5 December 2014, with completion expected to in February 2015. Under the new rules the SDLT is calculated as follows:
0% on the first £125,000 = £0
2% on the next £125,000 = £2,500
5% on the final £25,000 = £1,250
Total SDLT payable = £3,750