Hamptons International

Research
Stamp Duty Change Briefing Note

December 2014

The Chancellor has abolished the old slab structure of Stamp Duty. This is good news for the
operation and efficiency of the overall housing market. The number of transactions are the real
signal of the health of the housing market not the pace of growth of house prices. This move should
help to increase transaction activity, allow people to move more easily and with a lower financial
burden. This will help the labour market and the economy more widely too.
The new rates are:

0-125K 0%

125-250K 2%

250- 925K 5%

1.5m 10%

>1.5m- 12%

These rates are only paid on the value of the property within the threshold ranges so a property
valued at 200k for example only pays stamp duty on 75K at 2% rather than on the whole 200K
under the old regime.
The chancellor has given buyers who have exchanged contracts the choice of system to pay tax
under. For those not yet exchanged there is a requirement to have done so by MIDNIGHT
TONIGHT. Any cases close to exchange will have to be sorted by then in order to qualify. This is
more important for the values of property that Hamptons deal with as over 1m buyers will pay
more under the new rather than old regime
For Hamptons this change will affect our business more harshly given the price range in which we
operate. The additional cost of the duty adds to the overall cost of moving house thus affecting total
affordability. This will put downward pressure on prices and likely cause a pause in the numbers of
transactions as buyers and sellers assess the impact of the change. At values up to about 1.2
million the difference is relatively small, but above this it grows. It is here that there is likely to be
impact of the new system
The effect is likely to put downward pressure on prices. The risk is that there will be resistance to
paying the additional cost of the duty which may lead buyers to want to renegotiate prices down,
this will impact up the chain and likely add time to agreed offers and likely lower prices down the
line.
The main points are that:

Just below 1m home buyers pay less stamp duty under the new regime
98% of sales in the last 12 months were below this price
27% of buyers wouldnt see any difference but many of these dont pay stamp duty under
either system. 72% are better off and 2% worse off (rounding means doesnt quite add to
100)
The average amount buyers are better off is 1,600 better off under the new regime. The
average amount those paying more would have to pay is 31,000 thats a lot but its a
mean average up to the highest values to put it in context
The system is a big improvement on the slab tax. It will cause fewer distortions around the
threshold price points
The tax is now more progressive people at the higher end of the scale pay more than they
did a lot more than they did

Buyers of property priced over the 1m mark are still predominantly in London and the
South and they will therefore feel the biggest effects. Londons mix of property at this value
means that it will contribute more to government revenue, but most other places will
contribute less
Properties above 1m account for 98% of total sales so the vast majority of house purchase
transactions will pay less than they would have done
Buyers who have already exchanged contracts can choose which regime they choose to pay
tax under
The fast implementation of the new rates from tonight means that there is little room
for distortions in the pattern of transactions. Some conveyancers may have a long night
agreeing as much as they can that is close to exchange in order to take advantage. But as
the vast majority of transactions in the UK are below this threshold there shouldnt be that
many
Overall its a good move to get rid of the slab structure. Transactions are the most
important indicator of a healthy housing market. Ease of moving is also essential for labour
market efficiency so any move to remove hurdles to this are welcome

Comparing New Stamp Duty with Old

The proportion of government revenue from SDLT contributed by region

Of those who are better off in each region this is the amount they are better off by

Key Price Points

House Price
250,000
300,000
500,000
600,000
700,000
800,000
900,000
925,000
1,000,000
1,250,000
1,500,000
1,750,000
2,000,000
3,000,000
4,000,000
5,000,000

NewSDLT
2,500
5,000
15,000
20,000
25,000
30,000
35,000
36,250
43,750
68,750
93,750
123,750
153,750
273,750
393,750
513,750

Old Stamp Duty

2,500
9,000
15,000
24,000
28,000
32,000
36,000
37,000
40,000
62,500
75,000
87,500
100,000
210,000
280,000
350,000

Saving?
0
4,000
0
4,000
3,000
2,000
1,000
750
-3,750
-6,250
-18,750
-36,250
-53,750
-63,750
-113,750
-163,750

Of those who are worse off in a region his is how much on average they are worse off by