Stamp Duty Revenue Has Rocketed

The past twelve months have seen a 40% increase in the Treasury’s income from stamp duty. Halifax reports that tax revenue from the sale of homes has rocketed by 140% in the last five years.

The rising cost of property and the unmoving thresholds of stamp duty mean that properties in the stamp duty brackets of 3% and 4% now account for 79% of the revenue – at £5.1bn. The 3% bracket starts at properties selling for £250,000. The nil-rate band goes only to £150,000. Properties selling for £150,000 - £250,000 are subject to 1% tax.

The lion’s share of stamp duty is earned from sales of property in the south of England. London, the South East and East account for 73% of total revenue. Sales in London contributed £1.7bn in stamp duty in the past year – that is 27% of the total for the UK. Northern Ireland has seen a huge increase – more than doubling – in its contributions as the region has seen amazing house price growth in the last year.

The higher thresholds for stamp duty have not been raised since 1997, yet in that time average house prices have gone by 191%. In March 2005 the 1% band was put up from £60,000 to £120,000 and last year it was raised again – to £125,000. Even that has not matched house price inflation.

If thresholds had gone up with house price inflation, the 3% threshold would now start at £729,000, and the 5% thresholds (currently £500,000) would start at £1.46m.

An average first-time buyer in the UK now has to find £168,770, which means a stamp duty bill of £1,688. In London the average price of a first home is £279,659, meaning 3% stamp duty and a bill of £8,390. Only in North, North West, Yorkshire and the Humber, East Midlands, Wales and Scotland would average first-time buyers avoid stamp duty.

Chief economist at Halifax, Martin Ellis called on the Government to raise all stamp duty thresholds to reflect the increase in house prices in the last ten years.