Barclays has analysed the Stamp Duty changes which followed the Autumn Statement last week and the differences between the restructuring of the Scottish Land and Buildings Transaction Tax.
Andy Gray, managing director of Mortgages at Barclays, said: “The recent changes to the structure of Stamp Duty Land Tax (SDLT) in the UK have generally been welcomed as a fairer way to levy the charges from property purchases. However those buying more expensive properties, typically from £1m upwards, will now be paying more than before unless they managed to exchange contracts before midnight on 3rd December.
“These changes follow in the footsteps of a similar restructuring of stamp duty in Scotland under the Land and Buildings Transaction Tax (Scotland) Act 2013 which received Royal Assent on 31 July 2013 and will be introduced on 1 April 2015, replacing the UK SDLT. The revenue raised by this tax will be under the control of the Scottish Government rather than UK Government.
“The proposed rates and thresholds for the Land and Buildings Transaction Tax (LBTT) were announced by the Scottish Finance Secretary, John Swinney, in October this year. The SDLT rates announced this week show that a significant difference between the two schemes for properties valued at over £250,000. Under the Scottish LBTT scheme, the fee will be 10% on any amount between £250,000 and £1,000,000, however under the UK scheme, the fee is now 5% between £250,000 and £925,000. So Scottish purchases between now and 1 April 2015 will be charged at 5% but thereafter the charge will double.
“While the volume and proportion of transactions over £250,000 in Scotland are significantly lower than the rest of the UK, particularly London and the south-east, this still has the potential to have a major impact for affected transactions in Scotland, particularly in the major cities such as Edinburgh, Glasgow and Aberdeen. If the proposed 10% fee stays as planned, it could result in a spike in transactions in the first quarter of 2015 up to the 31 March deadline and a subsequent drop-off thereafter. One to keep an eye on in the New Year.
“Turning back to the SDLT changes this week, for many homebuyers this is a welcome and unexpected early Christmas present from George Osborne, who may now find that they have saved several thousand pounds which they had already budgeted for in their cost of buying calculations. Whilst this may provide a solution to paying for new furniture or even clearing those post-Christmas credit card bills, it could be worth considering whether it is worth revisiting their mortgage arrangements. Reducing the mortgage amount even by a small amount could lead to a not inconsiderable interest saving over the term of the mortgage. Also, a reduction in the borrowing amount could tip the mortgage into a lower LTV bracket and then switching to a lower interest rate could be an option, with further payment savings to be made. Taking these actions might well be more beneficial than putting the funds aside in an ISA, given the rate differential between savings and mortgages.
“For customers who are already in the process of taking a Woolwich mortgage from Barclays, we will be more than happy to discuss their mortgage arrangements with them and if this were to lead to a product change to a lower LTV product, we will waive the £150 switching fee for pipeline transactions that switch products between now and the end of January 2015. Customers should speak to their mortgage advisor in the first instance if they think this is an offer they could take advantage of.”