Stamp duty bills fall by £4,500
Homebuyers’ stamp duty bills have fallen to a typical £4,500 thanks to the reform of stamp duty introduced in December 2014, according to figures from the Halifax.
The UK’s largest mortgage lender said someone buying a property for £273,531 — the average price for a home in England and Wales — would pay £3,676 in stamp duty under the current system, compared to a bill of £8,205 under the old system.
A third of first time buyers (32%) paid no stamp duty at all, as these purchases were below the £125,000 threshold at which stamp duty is now levied.
However, buyers of more expensive properties are worse off under the new system. Anyone buying a house for more than £938,000 will pay more.
This tax hike on high-end properties has slowed the top end of the market. Sales of properties worth £1.5 million or more have slowed by 20% over the last year, while the market as a whole has declined by 10%.
Commenting, Craig McKinlay, mortgages director at Halifax, said: “The changes made to stamp duty a year ago have been of significant benefit to many buyers.
“Only those purchasing the most expensive homes are worse off. There is some evidence that the top end of the market has been adversely affected by the changes with sales over £1.5 million falling by twice as much as the market as a whole.”
The Treasury is also a major beneficiary of the changes, with stamp duty receipts reaching a record £7.5 billion in 2014/15. That’s potentially down to people rushing through expensive transactions under the old system, but it’s also because stamp duty thresholds have been frozen, despite prices rising 9.7% over the year to October, according to Halifax.
McKinlay added: “The failure to index the start point for stamp duty in line with house price inflation has dragged more buyers into the tax net in recent years. Buyers in London have been particularly badly affected with the capital accounting for an increasing and disproportionately large share of stamp duty revenues."
A hugely unpopular tax paid on property and share purchases. Stamp duty on property is levied at 1% for purchases over £125,000 (£250,000 for first-time buyers) which then moves up at a tiered rate. For property between £125k and £250k you pay 1%, then 3% from £250k up to £500k and then 4% from £500k to £1m and then 5% for properties over £1m. But unlike income tax, which is “tiered” and different rates kick in at different levels, stamp duty is a “slab” tax where you pay the rate on the whole purchase price of the property. On shares, stamp duty is charged at a flat rate of 0.5% on all share purchases. Figures correct as of May 2011.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).