Another feature of Alistair Darling’s debut budget was his decision to cut stamp duty on property purchases for first-time buyers and key workers with an annual household income of less than £60K looking for a new-build property; this cut, which comes into effect on 1st April, will see buyers on the New Build HomeBuy or Social HomeBuy shared-ownership schemes will be eligible for a cut in stamp duty.

Under the Chancellor’s new proposal, those who buys using one of these shared-ownership schemes is exempt from stamp duty until they own 80 per cent of the property, at which point they pay stamp duty at a reduced rate because it is only on the remaining 20 per cent.

So say your property was valued at £200,000, under the current rates (see the table below) and the new ruling, you would have to pay out 1 per cent on £40,000 of your house, or £400. You could, if you were hell bent on avoiding stamp duty, simply pay out for 79 per cent of your home and never have to pay the duty.

Buyers take out a mortgage equivalent to between 25 and 75 per cent of the value of a new-build property on a government-approved housing development and then pay subsidised rent to a housing association landlord on whatever percentage is left over. When you want to sell, your share in the property can either be sold to someone nominated by the landlord or, if you own 100 per cent of the house, you can sell on the open market at market value, although the landlord retains the right to a first refusal.

Currently, you only have to pay stamp duty if the value of your property exceeds that of £125,000, which may not seem like a wide margin until you consider that many analysts predict that property prices are set to fall throughout 2008 largely due to the credit crunch.

The following figures are taken from direct.gov.uk:

Residential property / Purchase price Rate of Stamp Duty Land Tax

• up to £125,000 0 per cent

• £125,001 - £250,000 1 per cent

• £250,001 - £500,000 2 per cent

• £500,001 or more 4 per cent

This entry was posted on Monday, March 31st, 2008 at 8:52 am and is filed under Housing Market, Mortgages, Taxes. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.