Stamp duty land tax limit raised to help kick-start ailing housing market

Monday 8 September 2008

The Chancellor of the Exchequer, Alistair Darling, has announced temporary changes to the stamp duty land tax (SDLT) limits to help those at the bottom end of the property ladder. What are the changes and what affect will they have?

What are the changes?

Alistair Darling, announced on 2 September 2008 that the SDLT lower limit (below which no SDLT is payable) would be raised for a temporary period of one year.

The SDLT lower threshold for residential property purchases has been raised from £125,000 to £175,000 for transactions taking place on or after 3 September 2008 up to and including 2 September 2009. This temporary measure applies where the transaction consists solely of residential property. All other SDLT limits remain the same.

What are the SDLT limits for residential property?

The temporary changes mean that the following limits apply to residential property transactions during the period 3 September 2008 to 2 September 2009.

What affect will this have?

The change to the SDLT limit means someone purchasing a property for £175,000 will save £1,750 during the temporary period. After 2 September 2009 the previous rates will resume and house sales for values between £125,001 and £175,000 will again attract an SDLT charge of 1%.

Karen Campbell, a Tax Partner at Grant Thornton says: "It is pleasing to see the Government making an effort to revive the property market by using the tax system. A 'SDLT holiday' for those purchasing property to the value of £175,000 could also help stimulate the market for new build property that has recently experienced difficult times. However, this initiative is only a short-term measure; it is still likely that a modification of SDLT thresholds in line with the overall house price index would be a more efficient way to deal with the property market. In light of tighter lending conditions and increased mortgage rates, buyers are struggling and SDLT, in no small way, is impeding millions of potential home-owners."

Campbell adds: "The 'slab' system for SDLT can cause prices in the market to be dictated by the thresholds. For property currently on the market at just over the £175,000 mark, this raised threshold may mean that £175,000 will be the best price that sellers can achieve as buyers seeks to avoid a SDLT liability."

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