Background to the changes
10.The Government announced at Autumn Statement 2014 proposals to change the basis of calculation for SDLT on residential property transactions where the effective date (usually the date of completion) is on or after 4 December 2014. Non-residential property transactions, the 15% higher rate charge and the charge on rent are not affected.
11.The changes introduced by the Act eliminate the “cliff edge” increases in SDLT liability which occurred under the old rules as prices rose above a rate threshold and the resulting pricing distortions around these thresholds.
12.Under the changes, rather than charging a single rate of tax on a transaction, each rate of tax is payable on the portion of the chargeable consideration which falls within the relevant band. The rates and bands have been adjusted to take account of the change.
| Residential Property (from 4 December 2014) | |
|---|---|
| Part of relevant consideration | Rate |
| So much as does not exceed £125,000 | 0% |
| So much as exceeds £125,000 but does not exceed £250,000 | 2% |
| So much as exceeds £250,000 but does not exceed £925,000 | 5% |
| So much as exceeds £925,000 but does not exceed £1,500,000 | 10% |
| The remainder (if any) | 12% |
13.Purchasers of residential property for £937,500 or less will pay the same or, in most cases, less tax than they would have paid under the old rules. Purchasers of residential property between £1m and £1.125m will also pay less tax. Purchasers of residential property for between £937,500 and £1m and above £1.125m will in most cases pay more.
14.The changes took effect by a Resolution passed by the House of Commons under section 5 Provisional Collection of Taxes Act 1968 on 3 December 2014 followed by a Resolution passed by the House of Commons under section 1 of that Act on 4 December 2014. This Act was introduced into the House of Commons on 4 December 2014. No prior announcement was made, and no draft issued for consultation, to prevent forestalling by purchasers and any resulting disruption of the housing market.