Stamp Duty – time to change the threshold?

As increasing house prices in London make purchasing property even more unaffordable, first time buyers continue to find it difficult to climb onto the property ladder. Together with the high London prices they also have to pay the additional and usually considerable stamp duty land tax.

Stamp duty is a tax paid by the buyer when they purchase a property in the UK. It is payable within 30 days of completion of the property purchase and varies between 2-12% of the price.

According to the Daily Telegraph, 71% of all first time buyers now pay stamp duty compared to 45% in 2013. In numerical terms over the same period, the number of first-timers paying the tax rose from 121,455 buyers in 2013 to 238,382 in 2016.

According to Nationwide’s House Price Index in March 2017, the average price for properties in London is £478,782. Using the HM Revenue and Customs stamp duty calculator this results in a stamp duty charge of £13,939.

For properties below £125,000 no stamp duty is payable but with the average properties in the UK being valued currently at £206,665 and in England £257,176 the threshold is becoming meaningless. Is it time therefore for the current stamp duty thresholds to be increased to keep up with the rise in house prices?

Some predict that house prices may fall in 2017 in part due to the increase in un-affordability, which will as a consequence lessen the stamp duty burden. This is not guaranteed particularly as there have been predictions like this before which proved to be false. Affordability for first time buyers is essential for the entire housing market. Raising the £125,000 threshold will be a positive step – something needs to be done and soon!

If you require advice on stamp duty or residential property matters please contact one of our solicitors in the Residential Property team here.