Stamp duty soars to an average £2,000

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by Kay Murchie

According to Halifax, Britain’s biggest mortgage lender, stamp duty for the average UK homebuyer has increased by more than 60% in the last 5 years.

Stamp duty bills across the UK averaged £1,971 last year, up from around £1,211 in 2002.

Stamp duty is paid when a property is purchased with the tax charged at 1% of a property’s value on homes worth between £125,000 and £250,000, increasing to 3% on homes worth between £250,000 and £500,000 and 4% for properties worth over £500,000.

The Halifax said those purchasing a property in almost one in three local authorities in the UK now needed to save the equivalent of over 20% of local average annual earnings to meet the tax, up from people in just 5% of local authorities in 2002.

Those purchasing a home in London and the South East face the largest stamp duty bills due to higher property prices in the regions. In London, the average home buyer needs to save the equivalent of 21% of average annual earnings while in the South East, they need to save the equivalent of 23%.

However in Scotland, stamp duty bills average just 5% of average annual earnings.

If the stamp duty thresholds had been increased in line with house price inflation since July 1997, when the two higher bands were introduced, the tax would be paid on homes worth £191,000, according to the Halifax.

Martin Ellis, chief economist at Halifax, said the higher stamp duty thresholds have not been changed since their introduction 10 years ago. We call on the Government to raise all stamp duty thresholds to account for the increase in property prices over the last 10 years and to index for house price inflation in the future.

Just last week, the National Association of Estate Agents (NAEA), urged Chancellor Alistair Darling to revise the threshold at which stamp duty is paid. NAEA president, Stewart Lilly said the Government needs to be aware with inflation increasing, consumers need a helping hand. We would like to see a scale of stamp duty that reflects the house price inflation in recent years.

The Chancellor will present his first Budget to the House of Commons on 12 March, with speculation growing that some kind of change to the stamp duty system will be announced.