Changes to the stamp duty rules come in, but how will they affect equestrian property-buyers?
The tail end of 2014 saw a revolution in the stamp duty land tax regime. For residential property sales, the levy is now charged at rising rates on different portions of the sale price.
Buyers pay nothing on the first £125,000 of the price, followed by 2% on the next £125,000, 5% on the next £675,000, then 10% on the next £575,000, finally reaching 12% on the rest, if the property sells for more than £1.5m.
The new rules were introduced to address the distortions caused by what George Osborne called “a badly designed tax on aspiration”. The old regime, said the chancellor, caused “big jumps in tax” whenever house values tipped into a higher band, placing an additional, disproportionately large burden on low and middle income families that already contend with steep house prices.
The chancellor estimates that 98% of homebuyers will be better off under the new system. But will it benefit equestrian buyers?
Impact on equestrian buyers
It crucially depends on how much they pay for their new house. For example, if you buy a house priced at £550,000, you will pay a total of £17,500 in stamp duty against the £22,000 you would have paid before 4 December. But if you buy a property priced at £1.2m, you will now pay £63,750 — £3,750 more than what you would have paid in the past.
As a result, the top end of the equestrian market is likely to be “adversely affected” by the change, according to Emily Cooper Reade of ECR Property.
“Today I had an offer come in much lower than expected (and too low to be accepted) because of the £100,000 which would be due on the new stamp duty,” she said.
Edward Heaton, of property buying agents Heaton & Partners, confirms that “the new rules are likely to further stifle what has already been a subdued market over the past few months.”
That said, Edward expects the impact to be short-lived: “Buyers at the top end tend to come to terms with the costs involved in buying, and they will ultimately take it on the chin.”
When you look at the market in lower price brackets, most agents agree the change is good news.
“Most buyers will pay less stamp duty,” notes Emily. “It is much better than the stepped system, which made very uneven increases at certain levels. Properties that were previously ‘on the cusp’ between two bands were ‘unnaturally’ pulled back in value to the threshold point. The new system should make valuations around these levels much more accurate.”
As Diana Andrews of Churchill Country & Equestrian observes: “The new stamp duty regime allows agents to negotiate on a sale because of the assets of the property, not due tothe nearest stamp duty threshold.”
Indeed, the new system could help trigger a bottom-up recovery in the market, according to Charlie Wells of buying agents Prime Purchase.
How to save
But even at the upper end of the market, the effect of the new system may not be as bad as you might fear. Rupert Sweeting of Knight Frank estate agents explains that equestrian buyers can still save enormously on stamp duty if they buy a mixed use property, where the levy is set at 4% for homes costing more than £500,000.
“[The new rules] won’t affect most equestrian yards as they will qualify for mixed use stamp duty at 4%,” he says.
Sellers of mixed use yards could benefit because the favourable stamp duty rules may make their properties even more attractive.
His views are supported by Heaton & Partners’ Edward Heaton, who has already noticed an increase in buyers wanting “a good chunk” of agricultural land as the stamp duty savings are so significant.
“Under the new regime, someone buying a residential property at £5m will pay £513,750 in stamp duty, whereas if they bought a mixed use [property], the charge would be £200,000 — saving over £300,000.”
