Martin Lewis's verdict on Chancellor's stamp duty reform in Autumn Statement

Описание: In his instant reaction to Osborne's Autumn Statement, the money-saving expert welcomes the Chancellor's stamp duty overhaul which will benefit 98pc of home buyers

Chancellor George Osborne has announced an overhaul of Stamp Duty Land Tax (SDLT) on property purchases in England and Wales, introducing marginal rates that will only apply to the portion of the price above a series of thresholds.

There will be no tax on the first £125,000 paid, 2 percent up to £250,000, 5 percent up to £925,000, 10 percent up to £1.5 million and 12 percent on everything paid over £1.5 million. A similar system was introducted in Scotland two months ago.

The reforms are anticipated to deliver savings for 98pc of home buyers.

The announcement follows pressure from leading industry experts who have brandished the bandings as archaic and punitive, preventing first-time buyers from securing a foothold on the property ladder.

What is a slab system?

The old stamp duty system, which ends at midnight tonight, works on a "slab" basis, so the percentages tax apply to the whole of the purchase price within that banding.

For example, a house priced at £250,000 would attract an SDLT of £2,500, but one of £250,001 would be liable to SDLT of £7,500, while one of £500,000 would be liable for £15,000 but a purchase of £500,001 would be liable for £20,000.

The result is that it has a distorting effect on the housing market, because a house is very difficult to sell at prices just above each threshold, for example, £250,001.

What is a progressive system?

The Chancellor's new system works more like income tax, which gets incrementally higher, and copied the current system in Scotland.

The SNP has just passed a new progressive Land & Buildings Transaction Tax (LBTT), abolishing the old stamp duty system used by the rest of the UK.

The regime is designed to stop a homeowner with a property worth £999,000 paying the same stamp duty as a property owner with a £500,001 house, but for the wealthier Scots this still means a considerable jump in their tax bill.

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