The Chancellor has abolished the "residential slab system" for paying stamp duty on property.
Since before the start of the millennium, stamp duty has been charged at 1% for properties worth between £125,001 and £250,000, and then 3% on properties worth £250,001 to £500,000.
That meant a stamp duty bill of £2,500 on a £250k home but £7,500 for one worth £250,001.
The thresholds were set by Gordon Brown in 1997 and have been in place ever since, despite house prices rising significantly during that time. The average house price in England and Wales has risen 205% since December 1997, according to Nationwide house price data, up from £62,037 to £189,388 in November 2014.
In his Autumn Statement, George Osborne announced the following changes. From midnight on Wednesday 3 December, a 2% charge will be levied on the portion of a property value on anything exceeding £125,000 up to £250,000.
A 5% charge will then apply to the portion of value that exceeds £250,000 up to £925,000. Between £925,001 and £1.5 million, a 10% charge will apply. And for everything above £1.5 million, a 12% charge will be enforced.
The Chancellor said 98% of homes paying stamp duty will be better off under the new system, which will result in a tax cut of £4,500 when buying an average family home costing £275,000.
The changes will also apply to Scotland from midnight until the introduction of its own system in April.
HMRC has an online stamp duty calculator tool available at hmrc.gov.uk/tools/sdlt.
Commenting on the stamp duty overhaul, Richard Donnell, research director at residential property market analysts Hometrack, said: "Stamp duty is a perennial topic for both the Autumn Statement and Budget. It is an inefficient tax and acts as a barrier to market liquidity which is bad for labour mobility, but the flipside is that it makes a significant contribution to the exchequer.
"Calls for change are beginning to manifest into reality, which suggests that the government feels that stamp duty is starting to have a detrimental impact on labour mobility and the ability of households to access the housing market. The slab structure of stamp duty does create distortions at the price breaks and these have been around for years.
"Moving towards a more progressive tax structure will help those looking to get on the ladder and will end up costing those with higher value homes more."
A fundamental rethink
Paula Higgins, chief executive of the HomeOwners Alliance, added: "Stamp duty has long been Britain's worst designed tax. Finally the government has listened to our long fought campaign for a fundamental rethink and reform.
The announcement today brings stamp duty in line with how income tax is calculated, a much fairer system. This will also stop some distortions in the housing market by stopping house prices clustering below arbitrary thresholds."
However, she believes he could have done more to help people get on the ladder. "While 98% of homebuyers will see a cut, we think the Chancellor missed a trick to really target low and middle income families aspiring to own a home with an exemption from stamp duty for first time buyers."