The holiday is over. First-time buyers are no longer exempt from stamp duty on properties valued between £125,000 and £250,000. Will the extra cost of stamp duty stop you from buying your first house?
My husband and I recently bought a brand new two-bed flat. We were supposed to complete before Christmas, but, as anyone who has ever watched Grand Designs could tell you, delays are inevitable on new properties.
Thankfully we didn’t have to pay stamp duty, due to the government’s ‘holiday’ for first-time buyers. Otherwise we’d have had to find almost £2,000 we hadn’t budgeted for.
Sure, we could have found this money, but our furniture budget would have been decimated, leaving us living in camping chairs and sleeping on the floor for the foreseeable future. Not a major hardship, but having set aside this money for furniture, I would have been loath to spend it on something we’d see no visible benefit from.
Stamp duty holiday over
Stamp duty – or Stamp Duty Land Tax to give it its official name – is the tax you pay when you buy a property (or land) worth more than £125,000. You pay a percentage of the purchase price, with different percentages dependant on the value of your house.
Since 2010, first-time buyers were exempt from stamp duty if they were buying a house that cost up to £250,000. This has now returned to the previous £125,000.
Most first-time buyers struggle to scrape together deposits, so while another £2,500 might not seem much in the grand scheme of buying a home, it could add another year or more to saving.
The cost of stamp duty
The average house price in England and Wales in January 2012 was £161,588. This would cost you £1,615.88 in stamp duty, on top of solicitor’s and mortgage fees, and moving costs. In London the average home costs £350,000. This is now in the 3% band, so you’d need a massive £10,481.31 for stamp duty.
It’s no wonder ‘second steppers’ are struggling to move up the next rung of the ladder. Once you’ve finished scrimping and saving for your first deposit, you now need to start all over again in order to afford the stamp duty on an – invariably – more expensive property.
As house prices rise (or fall, it depends on what newspaper you read), so does stamp duty. But the housing market is stagnating, so what if stamp duty was scrapped to get it moving again?
Of course, this would result in lost tax revenue for the government, presumably meaning that it would have to come from somewhere else. But people always spend when they move, which would mean more VAT going into the country’s coffers.
Are you less likely to move or buy a house due to the cost of stamp duty? Would you like to see the stamp duty holiday reinstated?