Stamp Duty Land Tax will be revised from midnight tonight.

Chancellor George Osborne has announced that the ‘single-slab’ rate will be abolished, and will be replaced by a system more akin to income tax.

The new rates will be as follows:

• Nothing on the first £125,000,
• 2% on the share above that up to £250,000;
• 5% on the share above that up to £925,000;
• 10% on the share above that up to £1.5m;
• then 12% on everything above that.

Osborne claimed that people buying an average house, worth £275,000, will save £4,500.

Jeremy Duncombe, director of Legal & General Mortgage Club, said: “We welcome any move that encourages more fluidity in the housing market. Stamp Duty has long been considered a prohibitive tax, especially in its current form. As it stands, as soon as a property goes over a certain threshold, buyers are penalised at the higher tax rate for the whole property price, not just the amount that falls over the divide. This can cause severe blockages in the market. Not only are many first time buyers struggling to save enough to get onto the ladder, with deposits, fees and taxes to be taken into account, but homeowners further up the chain can also be discouraged from moving as they are hit with these punitive duties. This in turn can lead to people out-growing their current homes, and fewer ‘first time’ properties available on the market.

“Whilst revisiting the structure of Stamp Duty will help to boost affordability, ultimately what’s really needed is a dedicated programme of house building. In order to stop house prices from escalating and allow the market to grow healthily and sustainably, we need to see a significant increase in housing stock across the UK. Yesterday’s announcement of a new garden city in Bicester will help towards this, however there is still more to be done.

“These are all steps in the right direction, but as we go into another election year, house building and affordability still remain very much on the political agenda.”