Since the changes came into force a year ago the typical home buyer has paid a total of £3,676 in stamp duty (based on the current average house price in England and Wales of £273,531. Under the previous flat structure, a buyer paying this price would have been subject to stamp duty payments of £8,205 – a saving of £4,529.
The ‘tipping point’ price is £938,000, when a buyer is worse off under the new stamp duty structure.
Impact of the new stamp duty structure
Sales above £925,000 – just below the ‘tipping point’ – in the first six months of 2015 were 10% lower than in the first half of 2014. This decline was exactly in line with the market as a whole, with total sales also down by 10%. This is in contrast to both 2013 and 2014 when the prime end of the market was significantly outperforming the rest of the market.
More significantly, sales above £1.5 million, which are more affected by the changes, have seen a bigger impact with a 20% decline; twice the market fall.
Stamp duty revenues in 2014-15 surpass previous 2007-08 record
Increased property prices and a higher number of residential property transactions boosted stamp duty revenues by 16% between 2013-14 and 2014-15 to a new record high of £7.5 billion (see table 2). This comfortably exceeded the previous high of £6.68 billion at the peak of the last housing market boom in 2007-08 and was more than 14 times as much as the £520 million raised by residential stamp duty 20 years ago’ in 1994-95.
London and stamp duty revenue
London alone contributed 40% of all UK stamp duty revenues in 2014-15 compared with 13% of all property transactions. London’s stamp duty share has risen from 28% in 2007-08, with revenues raised in the capital increasing by 60% from £1.9 billion in 2007-08 to £3.0 billion in 2014-15 (see table 2).
Impact of stamp duty on home buyers
Four-fifths (80%) of all home purchases in England and Wales between May 2015 and July 2015 were above the starting stamp duty threshold of £125,000 ranging from nearly all sales in London to 55-60% in northern England and Wales. This compares to 71% in 2006 when the starting threshold was initially raised to its current level. The starting threshold would now be £157,000 (£32,000 higher) if it were raised in line with house price inflation since 2006 (see table 3).
First-time buyers (FTBs) and stamp duty
Nationally, nearly one-third (32%) of all purchases by FTBs were below the £125,000 threshold at which stamp duty becomes payable during the three months from August 2015 to October 2015 (see table 4).
Commenting, Craig McKinlay, Mortgages Director at Halifax, said:
“The changes made to stamp duty a year ago have been of significant benefit to many buyers. Only those purchasing the most expensive homes are worse off. There is some evidence that the top end of the market has been adversely affected by the changes with sales over £1.5 million falling by twice as much as the market as a whole.
“The failure to index the start point for stamp duty in line with house price inflation has dragged more buyers into the tax net in recent years. Buyers in London have been particularly badly affected with the capital accounting for an increasing and disproportionately large share of stamp duty revenues.”