One in four first time buyers now pay stamp duty

One in four first time buyers now pay stamp duty
Despite first time buyers not paying any Stamp Duty on homes costing less than £300,000, soaring house prices mean growing numbers face a tax bill when they buy.

First time buyers currently don’t pay any stamp duty on the first £300,000, as long as the property they are buying doesn’t cost more than £500,000. However, house prices have risen by around £100,000 between 2014 and 2022, according to the HomeOwners Alliance, while Stamp Duty bands have stayed the same, resulting in growing numbers of first time buyers having to pay the tax.

The HomeOwners Alliance is calling for an urgent review of Stamp Duty, claiming that 30% more first time buyers are now paying it than in 2017 when first time buyer relief was introduced. Nearly half of all transactions (44%) now fall into Stamp Duty bands above £250,000, up from 38% in 2020 and an additional 31,500 transactions are now subject to stamp duty.

Paula Higgins, chief executive of the HomeOwners Alliance said, “It’s clear that the stamp duty tax needs to be reviewed to ensure it’s facilitating rather than fettering first time buyers. Against a backdrop of soaring house prices, cost of living crisis and increased tax burden, first time buyers of a home worth £400,000 are being hit with stamp duty bills of £5,000.

“Alongside announcing new initiatives to increase homeownership, the government needs to increase the existing first time buyer relief threshold. The relief was introduced in 2017 to reduce the upfront costs for first time buyers. Fast forward five years and there is a real risk first time buyers become a taxation cash cow, which can’t be right.”

The Alliance wants the Government to scrap Stamp Duty entirely for those buying a home to live in. Failing that, it would like to see the exempt threshold and bands raised by £100,000 in line with house prices, while the first time buyer relief threshold should be raised from £300,000 to £350,000 as a minimum.

Investors make up nearly half of Stamp Duty receipts

Although a significant number of first time buyers are now paying Stamp Duty, it is investors rather than homebuyers who make up nearly half of all Stamp Duty receipts.

Buyers purchasing properties in addition to their main home, whether they plan to let them out, use them as a holiday home, or just because they want a second property, must pay a 3% Stamp Duty surcharge on top of normal Stamp Duty rates. The additional property surcharge makes up around 46% of total Stamp Duty receipts.

Paula Higgins said, “We campaigned for the surcharge and continue to agree with the government that those buying a home to live in should be treated differently to those looking to make money out of property or buying a second home.”
Call our expert
advisers now
Call free from mobile or landline
Open 7 days a week