George Osborne will have won the Conservative Party a few votes with his crowd pleasing changes to Stamp Duty.
In amongst the economic forecasts and jokes at the opposition's expense George Osborne delivered some really good news in today's Autumn Statement. He has announced a complete overhaul of one of our most cumbersome, awkward tax systems– stamp duty. The shake-up to how this is charged will help the vast majority of us save money when it comes to moving house.
What is happening?
Osborne has announced a complete change to the way stamp duty is charged. Up until now it was levied in bands. If you bought a house for under £125,000 you paid no stamp duty, between £125,000 and £250,000 you paid 1%, then 3% up to £500,00, 4% up to £1m, 5% between £1m and £2m, and 7% on properties worth over £2m.
It was an awkward system that created dead areas in the housing market. For example, if you paid £250,000 for a house you sat in the 2% bracket and coughed up £2,500 in stamp duty.
But, if you new home cost £250,001 you were pushed into the next stamp duty bracket and would have to pay £7,500 in tax. As a result very, very few houses sell for between £250,000 and £265,000 as people don't want to pay that huge leap in tax.
Under the new system stamp duty will be tiered like income tax. So, you now only pay the higher levels on the part of the house price that is in that level. For example, if you buy a £280,000 home you'll pay no stamp duty on the first £125,000, 2% on the next £125,000 and 5% on the final £30,000. This will give you a total stamp duty bill of £4,000 as opposed to the £8,400 you would have paid before.
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Usually everything a Chancellor says should be listened to with caution and alert for stings in the small print, especially when it is a pre-election Budget they are outlining. Personally, anything that isn't due to come into effect until after May I tend to write off as election promises that they will find a way out of delivering. But, with stamp duty Osborne has announced that the changes will come into affect from midnight. So no backing out of it post-election.
The changes will also affect those in the home buying process right now. If you have exchanged on a property but not completed you can choose whether to pay stamp duty under the old system or the new allowing you to pick which will see you pay the least tax.
Compre mortgage rates now
Who will save money?
As with anything the stamp duty changes aren't good news for everybody. Anyone buying a home worth over £937,000 will pay more stamp duty under the new system. London buyers may not be thrilled at the changes either, just when the market was starting to cool these changes will get property racing off the shelves again at ever increasing prices.
But the vast majority of us don't live in the capital and buy houses for less than £1m. The average house price is £272,000, according to the Office for National Statistics, stamp duty on that will fall from £8,160 to £3,600 under the new system.
The average Londoner will also save money in terms of tax. In the capital the average house price is £514,000. The stamp duty bill on that will fall by £4,860 at midnight tonight. Unfortunately for Londoners the activity in the market that the stamp duty changes will incite will no doubt push prices up beyond that saving very quickly.
For most homebuyers the stamp duty changes are fantastic news. Buying a house just got a bit more affordable. Thank you George.
Read more about the Autumn Statement on AOL Money
Autumn Statement 2014: dramatic overhaul of hated Stamp Duty
Autumn Statement 2014: Winners and losers
Autumn Statement 2014: what it means for you