Tag Archives: real estate
Home sellers likely to benefit from new UK property tax rules as well as buyers
House sellers in the UK could be set to save £213 million a year to the tune of almost £7,500 each, according to research by property website Zoopla. The reform of the stamp duty property tax which took effect today will remove ‘dead zones’ that existed before each previous Stamp Duty band and see a more progressive approach adopted where buyers will only liable to the portion of the property’s value above each new level. In an analysis of property sales in the 12 months to May 2014, the firm reckons that 28,635 properties have been under priced in order to make them more appealing to buyers by avoiding steep jumps in stamp duty. Zoopla found that the number of property sales in the price bands immediately before an existing stamp duty threshold is significantly higher than expected, while the number of sales in the price band immediately after a threshold, the stamp duty dead zone, is considerably lower. ‘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. ‘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,’ he explained. ‘Unfortunately those buying property worth more than £937,000 may feel unduly penalised by the new reforms, but the new structure represents a more balanced system overall and a welcome alternative to the mansion tax plans that had been proposed,’ he added. As an example, a house purchased at £300,000 would have resulted in a £9,000 stamp duty bill. With the new system, a buyer will save £4,000 calculated as follows: 0% tax up to £125,000, 2% tax on £125,000 to £250,000 which is £2,500, 5% tax on the remaining £50,000, which is £2,500, leading to a total stamp duty bill of £5,000. Kevin Hollinrake, managing director of Hunters estate agents with 125 branches nationwide, said the firm has already had deals secured as a result of this change. ‘In our opinion, this is great news. For too long, stamp duty has distorted the market deterring sellers from marketing their homes and buyers from buying them in the dead zones above the key thresholds such as £250,000 and £500,000. This should mean more property coming onto the market, and therefore, more sales which is good for the housing market and the economy as a whole,’ he explained. There will be substantial savings for around three quarters of a million home buyers across England and Wales according to research from Savills as all buyers up to £937,000 will benefit. By contrast, around 17,000 transactions above a value of £937,000 will bear an increased stamp duty tax burden, undermining the case for any further taxation of high value property. ‘The change is likely to make the… Continue reading
CML says just 1.5% of mortgaged sales will pay more under new property tax rules
The Council of Mortgage Lenders has welcomed the stamp duty changes which have now come into place in the UK and revealed only a small number of mortgagees will be affected. CML director general Paul Smee said although there are losers as well as winners, the vast majority of mortgaged transactions will benefit from lower tax as a result of the change. CML data suggests that, among mortgaged transactions over the past year, 21.6% were for less than £125,000, 47.9% for £125,001 to £250,000, 29% for £250,001 to £925,000, 1.1% for £925,001 to £1.5 million, and 0.4% for over £1.5 million. The proportion of mortgaged transactions that would pay more tax under the new system is around 1.5%. He also talked about work that is being undertaken by the CML and consumer organisation Which? towards the creation of a new a set of measures that both organisations hope will aid transparency, understanding, and decision making for consumers when they are considering the overall costs of different mortgages. Smee explained that although the Financial Conduct Authority rules on the presentation and transparency of cost information are comprehensive, consumers do not always find the cost disclosure easy to understand. So this initiative is about looking at whether there are some practical steps, outside the scope of regulation, that can help. The CML and Which? have agreed to work together to consider practical steps on a number of issues including transparency and presentation of fees and charges to help improve consumer outcomes; standardisation of terminology around fees and charges; consumer education; and setting administrative charges so that they reflect the cost to the lender. The Treasury is taking an interest in this work. The CML and Which? have agreed to provide a progress report by the time of the Budget 2015. The overall project is expected to take up to six months to complete, and will produce a programme for future action, to be taken forward through industry guidance. ‘With the largest and most competitive mortgage market in Europe, UK customers are well-served for choice. We recognise that for this choice to bring the greatest benefit, consumers need to be able to understand and compare products confidently,’ said Smee. ‘We welcome the opportunity to work with Which? towards measures that can make this easier for them,’ he added. Continue reading
UK residential property tax changes widely welcomed
Sweeping reforms to the Stamp Duty Land Tax (SDLT) in the UK have been announced which take effect immediately and will mean many people, especially first time buyers, will pay less property tax. The reform announced by the Chancellor of the Exchequer George Osborne abolishes the previous archaic bandings with a more progressive system designed to help young professionals and families get on the housing ladder. The new charge will only apply on a portion of value that is above each new level. So there will be no SDLT up to £125,000, 2% up to £250,000, 5% up to £925,000, 10% up to £1.5 million and 12% over £1.5 million. Osborne pointed out that only on purchases of more than £937,000 will buyers end up paying more than they have done. It is also likely that the chances of a mansion tax should be introduced are much diminished. The move has been widely welcomed by the property industry with experts saying it was long overdue. ‘The abolition of the archaic slab system will take the sting out of the tail for thousands of buyers on the lower rungs of the ladder. The new graduated system should help brighten the UK housing recovery in regions outside of London, where property prices are still battling back to pre-recession levels,’ said Peter Rollings, chief executive of Marsh & Parsons. But he pointed out that it will add to the weight of the tax burden shouldered by those buying more expensive homes. ‘In prime parts of London, where 56% of property is worth £1 million or more, this will impact a significant proportion of ordinary working families,’ he said. But he also said that he expects any additional strain on the top tiers of the housing market to be absorbed, and the natural rhythm of the property market won’t be disrupted as buyers investing in prime London property are accustomed to having to pay a higher price than elsewhere across the country and the unparalleled returns and capital growth on offer more than make it worthwhile, so demand won’t be quashed. ‘London property taxes have historically been cheaper compared to other world cities, so this overhaul brings it into line with rival global centres of investment and although, one-off purchase costs are always a bitter pill to swallow, it won’t deter people from snapping up their dream home in a desirable location. Buyers will soon adjust and it will simply become the norm,’ he added. Peter Mackie, senior partner at independent buying agents Property Vision, pointed out that the change will help 98% of people trying to get onto the property ladder but the impact of the changes will be greater at the lower end of the market where buyers rely on borrowed money, rather than the higher end where if a buyer can afford to pay cash for a £50 million house they can afford the Stamp Duty. ‘The increases in Stamp Duty over £1.5 million… Continue reading
