Stamp Duty Doubles For First-Time Buyers

Stamp Duty Land Tax is payable in different amounts, depending on the purchase price of the property or land. It is an added expense, purchasers could do without.

 

Property Purchase Price                               Rate of Stamp Duty Land Tax

 

Up to £125,000                                                   0%

£125,001- £250,000                                           1%

£250,001- £500,000                                           3%

Above £500,000                                                 4%

 

Stamp duty for first-time buyers has almost doubled to an average of £1,751 in just five years throughout the UK. The biggest rise has been in London and the south where house prices are highest. The average duty paid increased to £8,675 in the capital. One in five buyers in the south now pays the tax at the rate of three per cent of the price of their home, adding a minimum of £7,500 to the cost of each purchase. In 2007, the treasury made £6.4billion from stamp duty.

 

Between 2002 and 2007, the average amount of duty paid by first-time buyers went up 82 per cent, from data given by Halifax Bank. Nearly all first-time buyers in London, the South-East, the South-West and East Anglia now pay the tax, which starts at the lower rate of one per cent on homes worth more than £125,000.

 

There is now clearly a national and regional divide, with some home buyers in the North of England, Yorkshire and Humberside, Scotland and Wales also, paying no duty at all. The Royal Institute of Chartered Surveyors said “By moving the threshold from £125,000 to £150,000, almost 17 per cent of all transactions would not pay stamp duty.” Last year more homes in England and Wales were pulled into the tax net by house inflation, and many within the industry are urging the Government to reset the marginal bands, to address the regional imbalances.

 

There are early signs of a slowdown in some parts of the Scottish property market, but prices still rose at an annual rate of 13 per cent in 2007, according to figures from the Bank of Scotland. The average Scottish house price was £144,897, although the average price in Inverurie, Edinburgh, Aberdeen and Helenburgh is more than £200,000. Capturing more home buyers in hthe stamp duty net.

 

Bank of Scotland press release (December 2007), estimated 300,000 first-time buyers entered the market across the UK, compared with 532,000 in 2002. This represents a reduction of 44 per cent. The average house price paid by a Scottish first-time buyer now stands at £123,000.

 

David Carmichael, area director, Savills Private Finance, a mortgage broker, said, “The number of first-time buyers who came into our offices has dropped from 40 per cent five years ago to 8 per cent today. The budget was a disappointment. The Chancellor has done nothing to help struggling homebuyers get a foot on the ladder.”

 

This tax is payable upon the completion of the purchase of your home. For Shared Ownership properties, stamp duty is not payable until you own 80 per cent of your home.

 

If you are buying a property in an area designated by the government ‘disadvantaged,’ you do not pay stamp duty land tax if the purchase price is £150,000 or less. You can locate these areas by visiting: www.hmrc.gov.uk to find out which areas in England, Wales, Scotland and Northern Ireland is exempt from stamp duty.

 

In the 2007 budget, Gordon Brown, as chancellor, announced that carbon-neutral homes costing less than £500,000 would be made free of stamp duty until 2012. Properties valued above £500,000, a £9,000 stamp duty discount is applied. The chancellor’s decision (earlier this month) to again freeze the thresholds will come as further blow to first-time buyers throughout the UK, who are already having affordability issues to contend with.  According to Bank of Scotland calculations, If the stamp duty had gone up in line with the UK house price inflation, since their introduction, stamp duty thresholds would now be:-

 

Property Purchase Price                                 Rate of Stamp Duty Land Tax

 

Up to £191,000   (since 1993)                              0%

£191,001- £720,000   (since 1997)                       1%

£720,001- £1.4million  (since 1997)                     3%

Above £1.4million                                                4%

 

With UK stamp duty predicted to increase above £10billion in 2007-2008, thresholds need to be lowered to help and encourage the first-time buyer back into the housing market, sooner than later.

 

 

Editor: Simon Weston-www.myfirsthomeltd.co.uk

 

Blog: www.myfirsthomeblog.com

 

Email: simon.weston@myfirsthomeltd.com

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