Never has spending a penny been so dear...

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The political party conference season has brought its usual focus on property matters – to tax mansions or not and help for first time buyers are among the topics this year.

Mansion tax is seen as something that won’t have many unexpected effects outside the London market, where some people have lived in properties for years, having bought them when prices were much lower.

The general market has pushed their property beyond the £1 million and frequently £2 million mark so they could suddenly be taxed as wealthy individuals even if they are cash poor, living on a pension, and only asset rich on paper.

Whether or not you feel sympathy for this new form of nouveau-riche may be brought more sharply into focus if you own a property around the £125,000, £245,000 or £475,000 marks or intend to buy one.

The Stamp Duty land tax thresholds start at £125,000.01 and change at £250,000.01 and £500,000.01 – never has spending a penny been so expensive.

Pay £125,000 for your home and there’s no SDLT but go up to £125,000 and there’s a bill for £1,250. Spend £250,000 on buying your house and the SDLT is one per cent (£2,500) but add that penny and it’s three per cent (£7,500). Beyond £500,000 it jumps to four percent, rising to five per cent as it passes £1m and seven per cent at £2m.

One of the effects of SDLT is that it artificially holds back natural rises in property values. For instance, many houses have been stuck in the market at £250,000 for years when they should naturally have been seeing gradual rises to £255,000, £260,000 and so on.

Buyers were reluctant to go beyond £250,000 because of the tax hike. As a result, owners have been missing out.

The recent upsurge in the market has seen those properties justifiably able to leap to £275,000 and beyond at which point buyers are less focused on the tax change and resigned to the extra cost. There’s no way even the most imaginative minds can get over the value leap to reduce tax (not that they ever should have done and HMRC is vigilant in spotting those who try).

Now a new set of owners has become stuck at the tax breaks, those who had a home valued at around £225,000 to £230,000 until recently or about £450,000. They have edged close to their thresholds but the problem comes when potential new owners think about making improvements.

While the house is currently below the threshold, buyers adding a £10,000 conservatory or spending the same on a kitchen/bathroom makeover will want to see a return on their investment.

Unless they are buying the house to be a long term place to live – the only reason anyone should normally buy – they will not invest because they can’t recoup.

It may be that owners hoping to achieve £245,000 knowing their home needs a £10,000 upgrade may have to spend the money beforehand, ask £249,950 and bear the rest of the loss – or stay put.

There will be some hard choices ahead, and not just for those who find themselves unexpected millionaires but don’t want to move from the home they have loved for years to avoid penalties.

Tough choices await many of us.