High-end estate agents call Osborne's stamp duty shake-up a 'kick in the guts' for the rich who face paying hundreds of thousands more for their mansions
- Chancellor announced major reforms to unpopular stamp duty system
- But some experts have warned it will damage top-end of housing market
- UK has estimated 500,000 homes worth more than £937,000 tipping point
- Fears sellers will fail to attract buyers unwilling to pay thousands more
- Estate Agents expect rush of completions on expensive homes today
- Shares in London agent Foxtons fell after the Chancellor's announcement
By Martin Robinson for MailOnline
High-end estate agents have turned on the Chancellor today warning that new stamp duty charges will hit at least 500,000 properties worth more than the new more expensive £937,000 threshold.
George Osborne has announced a major overhaul of the system in his Autumn Statement and demanded that the top two per cent of home buyers must pay more in tax from Midnight.
Experts have today called the decision 'disastrous' and a 'kick in the guts' for those buying and selling expensive homes.
Pressure: High end estate agents fear the market in London an other areas where many houses are worth more than the new £937,000 threshold could be stifled by the Chancellor's stamp duty changes
Up and down: While the majority will pay far less in tax on house purchases the rich will pay significantly more
George Osborne announces major reforms to stamp duty system
Shares in leading London estate agent Foxtons, where the majority of Britain's most expensive properties are, fell this afternoon after the Chancellor's stamp duty announcement.
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The Tory Chancellor announced the changes to raise more money from multi-million pound property transactions and to nullify Labour's calls for a mansion tax.
HOW THE NEW STAMP DUTY SYSTEM WILL WORK FROM TONIGHT
What is the stamp duty change?
Previously buyers paid the percentage above thresholds on the entire purchase price – creating a situation where tax bills rocketed from £2,500 to at least £7,500 when buying a home costing more than £250,000.
Chancellor George Osborne said the reformed stamp duty will kick in from midnight tonight.
Bands are now 0 per cent up to £125,000; 2 per cent to £250,000; 5 per cent to £925,000; 10 per cent to £1.5million and 12 per cent above that.
Previously they stood at 1 per cent above £125,000; 3 per cent above £250,000, 4 per cent above £500,000; 5 per cent above £1million and 7 per cent above £2million.
Who will pay less?
Under the new system anyone buying a home costing under £937,000 should pay less.
Those buying a £200,000 home will pay £1,500 instead of £2,000.
The big win though is for those previously caught in the 3 per cent tax trap, someone previously hit with an £8,250 bill on a £275,000 home will now pay £3,750.
Meanwhile, those buying a £600,000 home will now pay £20,000, compared to £24,000 before.
Who will pay more?
Buyers at the top end will pay the price for the reform.
Someone buying a £1million home will pay £43,750 instead of £40,000, but someone buying a £2,000,000 home will pay £153,750 rather than the current £100,000 levied just before the 7 per cent threshold kicks in.
Critics of the current 'slab' stamp duty system say it distorts the market because it suddenly jumps up if you pay a penny over the current thresholds.
But while the majority will now pay less in stamp duty those buying homes that cost over £937,000 will pay significantly more a £5million pound house will see taxes due on completion rise from £350,000 to £514,000.
Some experts have warned the changes due to start from midnight tonight will be 'disastrous' and called the reforms a 'kick in the guts' for top end of the market.
Experts believe the top-end market will be 'choked', particularly because those selling a house worth over the £937,000 tipping point will now find it harder to sell their home.
Some buyers are now rushing through the purchases today to avoid paying tens or even hundreds of thousands in extra stamp duty and sellers want the same to avoid sales collapsing overnight.
Trevor Abrahamsohn, who specialises in selling multi-million pound homes, says the market he deals in is already struggling and the changes are 'disastrous'.
He said: 'It is a big mistake. This is not something you apply to a shrinking market and if Labour get into power they will still introduce a mansion tax.
'The top-end of the market has been clubbed in recent years and now it is being hit harder. It is like giving medicine to the person that is well while forgetting about the poorly patient.
'It is good that they have got rid of the slabs but they have increased the rate in an area that is struggling.
'Instead of listening to everyone in Whitehall, they need to be speaking to people on the ground. Other agents keep ringing me to discuss the changes. It is mad.'
Simon Tyler, managing director of Tyler Mortgage Management, said: 'The top end of the market is getting absolutely whacked by this new system.
'I don't suppose many people will have much sympathy but it will be a kick in the guts for people who are stretching to borrow to buy that multi-million pound house, and will doubtless dampen demand at the top end as people reconsider the economics of moving compared to improving or expanding their existing home instead.'
Tremor: Shares in leading London estate agent Foxtons, where the majority of Britain's most expensive properties are, fell this afternoon after the Chancellor's stamp duty announcement
Uplift: This mansion in Hampstead, north London is priced at £2.25million. Before midnight the stamp duty £157,500 but from tomorrow it will be £183,750
Stamp Duty is Britain's oldest tax and under the old system the headline rate of stamp duty was imposed on the entire amount.
Jess Brammar, journalist, London
'Friend buying a flat that's £250k (ie just under stamp duty slab threshold). Offer accepted, seller just pulled out and gave no reason. Hmmm. Wonder if flat will go back on the market straight away at a slightly higher price.'
Ash Rees, property worker, Cardiff
'Not keen on the Autumn Statement figures in regards to Stamp Duty. Those higher priced properties just got even harder to sell. These HMRC Stamp Duty Calculators are not great reading for people who have recently completed on £250k+ properties #SorryDad'
Max Woolf, IT developer, Birmingham
'Dear George Osborne. I just bought my first house. Can I have my stamp duty back please?
Melissa Blake, personal assistant, Brighton
'Not sure if the stamp duty change is going to make things easier or if house prices will continue to rocket in price.'
David Miller, retired diplomat, Bedfordshire
'Perfect timing for me! Just exchanged contracts and this welcome change will save me almost £5,000 stamp duty. Very happy.'
Until tonight a property costing between £125,000 and £250,000 was charged one per cent of its value as tax, but a penny over the £250,000 threshold it suddenly jumped to three per cent.
With the new system, only the amount above £250,000 will be taxed at the higher rate, making the jump less painful.
It will end the long-standing problem of people struggling to sell homes at values just above each threshold.
It means any home sold for less than £937,500 will cost less in stamp duty than under the old system.
Homes worth less than 125,000 will continue to carry no stamp duty at all.
Anyone buying a home worth between £125,001 and £250,000 will have to pay two per cent in tax.
On houses worth between £250,001 and £925,000, they will pay 2 per cent on the slice from £125,001 and £250,000 and then only 5 per cent on the amount between £250,001 and £925,000.
The value of a property between £925,001 and £1.5million will be taxed at 10 per cent, and on more than £1.5million it will rise to 12 per cent tax.
People owning an average priced house will save a four-figure sum in tax.
But it is the very high priced houses which are affected the most though.
A £1.5 million house will now see the buyer paying £93,750 in stamp duty, an increase of 25 per cent on £75,000 currently paid.
A £2.5 million home will see stamp duty increase from £175,000 to £213,750.
Anyone buying a £4 million home will pay £393,750 in stamp duty - a 41 per cent increase from £280,000.
Expensive: This north London home is worth £1.35million and stamp duty on it will rise from £67,500 to £78,750
Expensive: This north London home is worth £1.35million and stamp duty on it will rise from £67,500 to £78,750
The Chancellor today abolished the 'slab' system which meant the amount paid in stamp duty increased sharply at each threshold
Under the changes, stamp duty on properties under £937,500 will fall but the bill will rise for more expensive houses
Revealed: HMRC has produced this table showing whether home buyers will be better or worse off after today's announcement
Meanwhile, a £10 million home will incur a 59 per cent increase, rising from £700,000 to £1.1 million.
Trevor Abrahamsohn, who specialises in selling high-end homes, says the market he deals in is already struggling and the changes are 'disastrous'
Edward Heaton, a property consultant, believes the increase would further stifle the 'subdued market' but said buyers will end up taking it on the chin.
He said: 'Unwelcome as this news might be to those of us in the industry, I don't think this will make London and the UK any less attractive to international buyers whilst wealthy British buyers will also come to terms with it.'
Peter Rollings, CEO of high-end agent Marsh & Parsons, said: 'Any additional strain on the top tiers of the housing market will be absorbed, and the natural rhythm of the property market won't be disrupted'.
And Martin Lewis, founder of Money Saving Expert, told MailOnline: ‘Scrapping the UK’s most unfair tax is something few can disagree with.
‘The market distortion caused due to the cliff-hanger taxes has always been wrong, and it’s good to see the Chancellor following what has already been announced in Scotland by scrapping it.
‘The great difficultly was trying to mimic similarly proportioned charges under the new system and a reasonable job has been done of that with the exception of million pound plus houses.’