Everyone has to pay Stamp Duty when they buy a house. The "Stamp out Stamp Duty" campaign from the TaxPayers' Alliance is hoping to persuade the Government to abolish this tax. In fact, even Government reviews have concluded that the Stamp Duty tax needs changing.
What is Stamp Duty?
You have to pay Stamp Duty within 30 days of completing on a house. Rather than a fixed proportion of the value of the house, there are bands so the amount you have to pay can suddenly jump if you cross a threshold. You are not allowed to add the Stamp Duty to your mortgage so it has to be added to the cost of a deposit and other moving costs. This is particularly bad for first time buyers.
What has the TaxPayers’ Alliance said?
Speaking on the BBC’s Daily Politics show, Matthew Sinclair from the TaxPayers’ Alliance claimed that Stamp Duty only makes up 1% of tax revenue and so could be “cut with very little impact on the public finances”.
This view was echoed this week by the London Central Portfolio that published research claiming that people are often forced to sell at a discount of up to £10,000 to avoid the duty. It also pointed out that the 3% threshold hasn't changed since 2000 when the average house price was £79,242. Today the average house price stands at £242,415 according to the BBC.
Why are Stamp Duty Levels a problem?
The problem with the different bands is that you can quickly have a large rise in Stamp Duty if you slip into a higher band. So a property worth £240,000 would have a Stamp Duty charge of £2,400 but for one at £260,000 you’d pay £7,800. The difference in monthly payments for the two properties would be just £77 [ £1003- £926.3 with 10% deposit] Source: Douglas Allen Mortgage Calculator.
There are several areas we cover at Douglas Allen where the average price is close to moving into the next Stamp Duty band. The average price in Dalston is £466,136 so it won’t take much to move up to 4%. It’s a similar story in Gravesend and Wickford with property values close to moving into the 3% band. Source: Zoopla
What are the Stamp Duty Costs?
The exact Stamp Duty rates are:
- Below £125,000: 0%
- £125,000 to £250,000: 1%
- £250,000 to £500,000: 3%
- £500,000 to £1,000,000: 4%
- £1,000,000 to £2,000,000: 5%
- Over £2,000,000: 7%
There may be an extra payment if you are buying a leasehold property. See this page on the HMRC for more information.
What’s going to happen to Stamp Duty?
Unfortunately Stamp Duty is unlikely to change any time soon, although it might if the housing market starts to slow down or if it starts to sound like an election winning pledge. Find out more about the campaign at http://stampoutstampduty.org/