Stamp Duty Land Tax: Major reform

Graham Chase, Tax Partner, CMS

For residential property only – a new calculation basis applies from 4 December 2014. The so-called “slab system” where SDLT was paid on the full amount of the purchase price, resulting in cliff edge pricing distortions where rates change, is abolished. Instead increasing rates of SDLT will be paid only on that portion of the property value falling within the band.

The Government says that this will be a cut for 98% of taxpayers who pay SDLT. Below £937,500 purchasers will pay less (or the same). But above that amount purchasers may face significant increases. The highest marginal rate is set at 12% for that portion above £1,500,000.

Where a contract is exchanged before 4 December, but completes on or after that date, the purchaser can choose whether to pay SDLT under the old rules or the new rules. Real estate teams will be busy up to mid-night tonight!

The new rates and bands are as follows:

  • 0% on any amount up to £125,000
  • 2% on any amount over £125,000 up to £250,000
  • 5% on any amount over £250,000 up to £925,000
  • 10% on any amount over £925,000 up to £1,500,000
  • 12% on any amount over £1,500,000

The political argument being made by the Chancellor is that these changes represent a coherent policy around the taxation of housing, compared to the so-called “mansion tax” proposals of other parties. The significant increases in SDLT at the higher end need to be seen in this context (ie as part and parcel of a no mansion tax package). The Chancellor introduced the change as follows:

“Mr Speaker, there has been a debate in this country about taxing houses. The system I introduce today replaces a badly designed system that has distorted our housing market for decades. It reduces the stamp taxes for 98% of people who pay them in this country. It increases the taxes on the most expensive 2% of homes, but only asks people to pay that tax when they buy the house and they have the money. And it does not involve a revaluation of hundreds of thousands of homes in this country. Today I’m cutting stamp duty for millions of homebuyers in this country. 98% will be better off. It is a fair, workable, lasting reform to the taxation of housing.”

A factsheet setting out the changes is available here.

An online stamp duty calculator is available at

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