Chancellor George Osborne has announced major reforms to stamp duty that will affect most of the country's homebuyers from midnight tonight.
Under the current system, homebuyers pay tax of 1% on any properties worth between £125,000 and £250,000 and from 3% upwards on properties costing between £250,001 and £500,000.
The jump from 1% to 3% on stamp duty has been criticised as unfair and in his Autumn Statement, Mr Osborne described the system as "badly designed".
He said that the new costs will reduce the costs of buying a home for 98% of buyers.
Mr Osborne said the reform represented an overall tax cut of £800 million per year, and would save buyers of an average £275,000 home £4,500.
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In what has been described as the Conservative Party's answer to Labour's 'Mansion Tax', the reforms mean that only buyers of homes that cost more than £937,000 will see their bills increase.
Stamp duty on a £5 million house will rise from £350,000 to £514,000.
HM Revenue and Customs has set up an online calculator that enables property buyers to work out the exact amount of stamp duty they will have to pay for residential and non-residential properties.
The system I introduce today replaces a badly designed system that has distorted our housing market for decades.
Examples of how stamp duty will be paid under the new rules:
Homebuyers who have already exchanged contracts on a property and have not yet paid stamp duty but complete the purchase on or after 4 December will be able to choose whether the old or new rules apply.
The way stamp duty is paid is not changing. Buyers must submit a stamp duty return and pay what is owed within 30 days of completing the sale.
Buyers of properties costing more than £40,000 but which are under the threshold for paying stamp duty are still required to submit a stamp duty return.
A solicitor or conveyancer is usually employed by homebuyers to complete a valid stamp duty return.
The HMRC then issues homebuyers with a certificate that allows them to register the title to the property at the Land Registry, or in Scotland at the Registers of Scotland.