This is a reform that will win him friends. On his own figures, it means 98 per cent of purchasers will now pay a smaller Stamp Duty bill when buying a property – the average saving could be as high as £4,000 on some estimates.
Moreover, the cliff edge system was always dumb. For one thing, it never seemed fair that someone paying £250,000 for a property incurred a 1 per cent Stamp Duty charge totalling £2,500, while someone paying £251,000 had to pay 3 per cent on the whole purchase price, racking up a bill of more than £7,500. For another, the effect of this structure was to distort the property market, with buyers desperate not to pay prices tipping them into the higher rates.
Against all that, however, the new rates of Stamp Duty at the top end of the market are pretty swingeing – the 12 per cent band above £1.5m is a full 5 percentage points higher than the previous top rate of 7 per cent, which didn’t kick in until £2m. The 10 per cent rate for purchases between £925,000 and £1.5m is at least twice as much as buyers were previously paying.
The move to a graduated system, in which the full rate is only payable on the amount above the threshold (as with income tax) will mitigate some of the effects of these higher rates. It means that the break-even price on this tax change is £937,500.
Thereafter, however, Stamp Duty bills will rise sharply. On a £1m property (or a garage, as Myleene Klass would call it), there will be an additional £3,750 to pay. At the £2m mark, the additional bill comes to £53,750. And anyone paying £5m for a property will now find themselves shelling out an extra £163,750 of tax.
Those are big losses by anyone’s standards and people on the wrong end of the seesaw are going to be pretty sick about it. The dynamic of the housing market in the UK today means most of those losers are going to be in London, of course, but Knutsford, the Chancellor’s constituency and home to a fair few footballers’ mansions, won’t escape scot-free.
What will really be worrying some people now is the prospect of this tax being combined with Labour’s Mansion Tax. For you can be sure that should Ed Miliband make it to Number 10 and get it introduce his new tax on properties worth £2m or more, he won’t be dropping Mr Osborne’s reforms to compensate.
By Jonathan Samuels
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