MortgagesJun 12 2015

Homebuyers pay £1.5bn more Stamp Duty than a year ago

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Homebuyers pay £1.5bn more Stamp Duty than a year ago

Stamp Duty revenue raised in England and Wales increased by an estimated £1.5bn to £7.7bn in the year to March 2015 - comfortably exceeding the £6.2bn in the year to March 2008 - the peak of the last housing boom.

A higher number of residential property transactions and increased prices are estimated to have led to the rise in Stamp Duty revenues in the last 12 months, with the average homeowner now spending £9,600 on it as they move up the housing ladder.

Lloyds Banking Group data suggested that homeowners stay in their homes for just under eight years on average, and take three steps up the ladder in their lifetime. Based on this, the research looked at those homeowners who bought their first property in 1999, their second in 2007 and their third in 2015, living in typical homes at each step.

The proportion of first time buyers paying Stamp Duty has more than doubled over the past 16 years from one third in 1999 to two thirds in 2015. In London and the South East over 90 per cent of first time buyers now face paying Stamp Duty on their purchase.

The highest overall Stamp Duty costs are faced by buyers in London - four times as much as the £38,600 average for England and Wales - and the South East - a lifetime cost of £22,800.

The lowest lifetime Stamp Duty costs are in Wales which, at an average of £3,800, are less than 40 per cent of the England and Wales average.

Based on regional average house prices for typical first time buyer homes in 1999, Stamp Duty was only a factor for those first time in London and the South East. By the time these people were ready to move on to their next home (in 2007), the average Stamp Duty for their new property had risen to £2,283.

In May 2015, those buyers moving on to their ‘final’ home faced an average Stamp Duty bill of £7,400. This is £2,500 (26 per cent) lower than in May 2014, mainly due to the reforms implemented last December.

Under the new progressive structure of Stamp Duty, no tax is paid on any of the value of a property below the starting threshold of £125,000.

Above the first threshold, tax is charged at the relevant rate on the amount by which the selling price exceeds the threshold. This is continued through the various thresholds to the top rate. The ‘tipping point’ price is £938,000, at which point the buyer is worse off under the new structure, therefore, the overwhelming majority of home buyers pay less Stamp Duty.

Nitesh Patel, housing economist at Lloyds Bank, said that the reforms were welcome, but as these figures show, the overall revenue raised with Stamp Duty actually increased by £1.5bn in the year to March.

Stamp Duty accounts for almost a quarter of the costs of buying a home. The average cost of moving home in the UK stood at £8,689 in 2014 - 5 per cent higher than £8,258 in 2013.

peter.walker@ft.com