Although raising the money for a deposit is often the biggest challenge facing first time buyers, stamp duty land tax (STLD) must not be forgotten. It’s surprisingly easy for the uninitiated to overlook that cost, particularly those with memories of a ‘stamp duty holiday’ which no longer applies. But with very little choice available in this area for less than £125,000 stamp duty is a fact of life even for first time buyers.
Some first time buyers may even tip over into a 3% stamp duty bracket, buying a home for £250,000 will cost £2,500 in stamp duty whereas buying a home for £250,001 will cost £7,500.03, that’s a big cost and people moving to their second or third home are likely to incur greater costs.
The income from SDLT has increased by 40% since 2002-03 despite a 45% reduction in the number of transactions during the same period, attributing factors including the recent recession and historically low levels of house building.
The squeeze on availability has led to increased house prices which has in turn mitigated the reduction in transactional volume and ultimately led to an increase in SDLT revenue for HM Revenue and Customs.
Over the past decade the UK average price of a residential property has increased by 45% to £247,693, moving ever closer to the 3% threshold. The thresholds have remained unchanged in a changing property market, so don’t reflect the state of play today, particularly in the South East.
This cost is an increasing barrier to moving as high living expenses reduce the average person’s ability to save, dis-incentivising those who could downsize, preventing those who would upsize, reducing movement in the housing market and resulting in an inefficient use of housing stock, compounding the issue of suitable stock availability.
With house prices predicted to grow further the pressure is on for the Government to reassess and reduce this impediment as its negative effects will be amplified if the only changing factor is the increase in house prices.
Useful advice and information on Stamp Duty Land Tax: