Stamp duty takings rise by £1billion in one year

HOMEBUYERS paid nearly £1billion more in stamp duty last year as house prices rocketed, it is revealed today.

A typical family will spend £12,000 on the tax over their lifetime – rising to nearly £40,000 for Londoners.

A report by the banking giant Lloyds lays bare the crippling impact of what has been labelled ‘a strong contender for the UK’s worst-designed tax.’

Households are being forced to pay more and more in stamp duty because house prices are rising so rapidly, currently increasing by around £220 a day.

Experts say it is yet more evidence the tax is ‘distorting’ the housing market and preventing people from buying and selling homes. Buyers must budget for ever increasing duty bills while sellers stay put to avoid paying the tax on their next purchase.

Twenty per cent of homes sold last month exchanged for more than the asking price, compared to seven per cent in September, according to the National Association of Estate Agents. More than eight people are chasing every available property.

Over the last year, the Lloyds report estimates homebuyers in England and Wales spent an extraordinary £5.6billion on stamp duty. Twenty years ago, they were paying £255million a year.

There is now a growing list of bodies – from the Council of Mortgage Lenders to the Royal Institution of Chartered Surveyors – calling for the duty to be overhauled. The Institute for Fiscal Studies, the leading economic forecaster, said the duty was ‘a strong contender for the UK’s worst- designed tax’, and said the way that it was charged was ‘perverse’.

RICS said it was ‘archaic’ and ‘distorting the market.’

Paula Higgins of the Homeowners’ Alliance said: ‘ The Government needs to take a radically different approach make stamp duty fairer and to help fix the dysfunctional housing market.’

The CML said stamp duty bills are ‘sufficiently large to discourage some people from buying and selling’. Marc Page, mortgages director at Lloyds Bank, said: ‘The £12,000 stamp duty bill over a lifetime just goes to show that unfortunately some dreams still come with a price tag.’

Official figures, from the taxman, show the amount raked in from the levy was £4.7billion in England and Wales in 2012/13, the latest year for which figures are available. But today’s report from Lloyds estimates the bill this year has jumped to £5.6billion – an increase of almost £900million. Others say it might be even higher.

Today’s report from Lloyds looked at a family which typically takes three steps up the housing ladder. In the example, they bought their first home in 1998, their second one in 2006 and their third this year.

On their first home, which cost £54,246, they paid no stamp duty in 1998. In 2006, they paid £1,898 on their home, which cost £189,837.

This year they paid £9,884 on their home bought for £329,460, making a total bill of £11,782. In London, the bill is £38,048.

Lloyds said the Government’s failure to increase the levels at which the tax is charged has been a money-making trick. Until 1997, it was charged at one per cent on all homes sold for £60,000 or more.

Today it is charged at one per cent on properties between £125,000 and £250,000, three per cent up to £500,000 with rates rising to a maximum of seven per cent on homes over £2million.

In 1998, the average first-time buyer did not pay stamp duty. Today they typically pay £2,382.

A Treasury spokesman said the duty was an important source of revenue, needed when the Government was focused on cutting the deficit.