The higher stamp duty thresholds, £250,000 and £500,000, have been unchanged since their introduction in July 1997 despite a 140% increase in house prices over the period to January 2011. If the higher stamp duty thresholds had been increased in line with house price inflation since July 1997, the £250,000 threshold would now be £600,000 and the £500,000 threshold would stand at £1,200,000, it says.
Halifax examined the impact of the stamp duty thresholds over the past ten years using house prices and home sales from the HM Land Registry and Halifax's own extensive housing statistics database.
The failure to raise the higher stamp duty thresholds has helped to drive a five fold increase in the proportion of home buyers required to pay stamp duty at the higher rates over the past decade.
Halifax has calculated that the proportion of residential property sales worth over £250,000 and, therefore, attracting a minimum stamp duty rate of 3% stood at 26% in 2010, over five times the percentage of sales over £250,000 in 2000 (5%). There are an estimated five million homes in the UK that are now valued above the £250,000 stamp duty threshold compared with 875,000 in 2000.
It also found that stamp duty revenue rose by 12% from £2.9 billion in 2008/09 to £3.3 billion in 2009/10. However, stamp duty revenue has more than halved since reaching a recent peak of £6.7 billion in 2007/08. This is largely due to the declines in both the number of house sales and house prices over the period.
Some 86% of the total residential stamp duty revenue raised in 2009/10 was accounted for by the amount raised at the higher stamp duty bands. Ten years ago, the higher stamp duty bands accounted for 49% of total residential stamp duty revenue.
The research also found that average stamp duty bill has risen by 88% (£838) over the past decade with home buyers seeing the amount they pay rise from an average of £955 in 2000 to £1,793 in 2010. The average stamp duty paid is currently equivalent to 5.4% of average UK full-time earnings, up from 4.2% in 2000. Stamp duty is highest in proportion to earnings in the capital with the average stamp duty paid accounting for 19% of a Londoner's average annual full-time earnings. In contrast, the average house price in the North East remains below the threshold for the lowest stamp duty band.
An additional four in ten, 38%, of first time buyers are exempt from paying stamp duty due to the temporary increase in the starting threshold from £125,000 to £250,000. Overall, 95% of first time buyer purchases are now below the £250,000 threshold. Regionally, the South East has benefited most with nearly three in four, 73%, of first time buyers now exempt from paying stamp duty due to the doubling of the threshold.
Just 1.1% of residential property sales will be affected by next month's increase in the stamp duty rate from 4% to 5% for homes worth over £1 million. Unsurprisingly, London has the highest proportion of million pound home buyers at 4.7%. The increase will add £10,000 to the total stamp duty bill for someone paying £1 million for a home.
‘It is encouraging that a number of steps have been taken in recent years to aid those looking to get on the property ladder, including the temporary increase in the starting threshold from £125,000 to £250,000 for first time buyers,’ said Martin Ellis, housing economist at Halifax.
‘The future for stamp duty continues to provoke much discussion with some advocating fundamental changes including index linking the stamp duty thresholds to house price inflation or even replacing the current system with an annual property tax. Any further changes to stamp duty will ideally reflect the economic benefits associated with promoting greater residential mobility,’ he added.
