Stamp Duty Land Tax is a tax which is paid when purchasing a property. It largely depends how much the property costs in total, and is worked out as a combination of percentages.
A property will not require any tax to be paid on it until it costs between £125,001 and £250,000. When the price falls within this margin, 2% tax must be paid on the amount that crosses the threshold.
For example, if a house costs £125,100, the tax will be £2 as that is 2% of the £100 over the threshold amount.
If the property value exceeds £250,000, then the property enters a new tax margin. In addition to the tax already paid on the £125,001-£250,000 margin, the buyer will have to pay 5% on the amount of money paid over £250,001, up to £925,000. Past £925,000, a new margin is entered. See the table below for the margins and their tax rates.
|Property Price||Stamp Duty Rate|
|Up to £125,000||0%|
|Over £125,000 to £250,000||2%|
|Over £250,000 to £925,000||5%|
|Over £925,000 to £1,500,000||10%|
This is a more complicated system than was previously used, but this graduated approach to tax, similar to income tax, overcomes many unfair issues the old system had. It is also more lenient on people purchasing cheaper properties, and is harsher on people buying larger, more expensive properties, under the assumption that those buying larger homes will be able to afford higher tax rates.