A report conducted by the campaign group, Homeowners Alliance, has discovered stamp duty has risen by almost 10 times since the mid 90’s.
Since 1995, average stamp duty fees have risen from £532 to almost £6,000; this is seven times the rate of inflation and five times the rate of house price rises.
Stamp duty is paid by homebuyers, purchasing property worth over £125,000 and has become a major source of revenue for the Treasury. The group revealed the government made just £830 million from house stamp duty in 1997, whilst 10 years later they collected eight times that amount, at £6.68 billion.
However, the Homeowners Alliance believes the housing market is being “choked” by the tax. The pressure group is pushing for a reconstruction of stamp duty, including changes to the thresholds and an exemption for first time buyers. They would like the stamp duty brackets to rise annually in line with house price increases. If thresholds had risen in line with house prices, the existing £250,000 threshold would now stand at £600,000, whilst the £500,000 category would have been lifted to £1.2 million.
Unsurprisingly the highest stamp duty fees are paid in London; on average, £17,529 was paid in stamp duty fees per house purchase, as house prices are among the highest in the country. However the North East pays the lowest, at an average of £1,466.
The highest stamp price percentage of 7% is paid on homes worth over £2 million. Meanwhile those who are buying a property worth less than £125,000 do not have to pay any stamp duty.
As the report continued, it argued that a reduction in fees would increase government revenue, as more homeowners would feel encouraged to move.
Paula Higgins, Chief Executive at the Homeowners Alliance, said: “The housing market is being choked by the rising cost of stamp duty. The overwhelming majority of people want to own their home, and the government says it wants to help them.”
She continued: “But the reality is that its ‘home tax’ is taxing their aspirations to death.”
Stamp duty equals three months wages
The Homeowners Alliance also said the average amount of stamp duty paid, currently equals almost three months’ earnings. In comparison to the mid 90’s when homebuyers only paid an average of one week’s wages. The stamp duty system has changed significantly since the 1990’s, when there was only one level, now there are five levels to determine the amount payable.
Many experts believe altering the stamp duty system and reducing the amount payable would improve the housing market. According to many experts, changing the system would allow more potential home buyers to move, as many currently find the level of stamp duty unaffordable.
However, if the Homeowners Alliance are correct, restructuring the system could benefit both the government and potential home buyers; with the changes resulting in greater revenue for the Treasury.