Stamp Duty is now increasing at a rate more than five times that of salaries - annual gross income in the UK rose by 54.3 per cent in the last 10 years, whilst the stamp duty bill on the average UK property rose by 289.2 per cent in the same period.
These shocking figures are a result of significant house price growth over the last decade, which has seen the average UK house price almost triple from £68,777 in Q3 1997 to £198,898 in Q3 2007. Stamp duty thresholds have failed to take into account this house price boom, causing the stamp duty bill on the average UK home to increase from £688 in 1997 to £1,989 in 2007.
In addition, over this period the significant increase in average house prices pushed seven of the UK’s twelve regions over the nil-band threshold. Indeed, many potential homeowners in regions such as Yorkshire and Humberside, Northern Ireland, Wales and the North West found they had to find an average additional £1,722 when they purchased their first home. This is a significant sum for the average UK consumer whose monthly take home pay is £1,565 after tax.
Paul Chafer, sales and marketing director from Stroud & Swindon Building Society commented: “These worrying figures highlight how stamp duty has become so out of touch with the housing market, salaries and the economy as a whole in recent years.
"As the research reveals, stamp duty has outstripped the rise in annual salaries by more than three times - which is something the Government must review. Not only is this tax making it more difficult for first time buyers to get their foot onto the property ladder, but also adds an extortionate bill to those trying to move home.
“This must be put at the forefront of the Government’s agenda, and so it was very disappointing to see that - contrary to speculation - stamp duty was not mentioned in the Pre Budget Report. We call on the Government to raise the stamp duty threshold in order to take into account the astronomical house price growth that has occurred over the past decade. This includes raising the nil-rate threshold above the current rate of £125,000 to something more in line with current house prices such as £200,000.
“In addition, we would like to see stamp duty being treated as a proportional tax, such as income tax. This would involve introducing a tiered interest rate where consumers are only taxed on the proportion of their property value that exceeds the stamp duty threshold. By introducing such a scheme, the ‘price bunching’ effect that stamp duty can have around thresholds will be reduced, allowing properties to sell for their true values.
“Introducing these changes will ease the home buying process for many consumers – especially first time buyers, and bring stamp duty more in line with current salaries. This change would be a key factor in preventing the stagnation of the housing market.”
