The great stamp duty debate

The increasing complexity of UK stamp duty and the extra levy introduced for buy-to-let landlords has been blamed for a recent slump in the market.

While some are urging the Chancellor to cut stamp duty to revive the housing market, others believe a cooling of the market is exactly what’s needed to stop property-prices spiralling out of control and to give first-time buyers a fighting chance.

Home-mover mortgages dropped 7.9 per cent in the year to June and buy-to-let lending shrunk by over 19%.

Vicky Bibiris, a Partner at Location Location estate agency in Stoke Newington, said: “Interest rates were low for so long that we saw a surge in the number of buy-to-let landlords investing in property and, partly as a result, house prices rocketed. But with so many people in debt, the Government had to look for other ways to cool the market down beyond increasing interest rates.  As well as tightening lending criteria to make it harder for people to borrow, they adjusted stamp duty to make it harder to buy investment properties.

“The move has been very effective in slowing the market down and cooling price growth – we’ve certainly seen a dip in the number of people buying to invest and it’s a welcome opportunity for first time buyers and those looking to up-size.”

Landlords pay an additional 3% stamp duty on investment properties, which alongside cuts to mortgage interest tax relief, has hit investors hard. While stamp duty on a £400,000 property would cost a homeowner £10,000 – it would cost landlords £22,000.

In England, properties below £125,000 are exempt from stamp duty – buyers pay 2% on anything above that up to £250,000 (£2,500) and 5% on the next £675,000. The levy on a £925,000 property is £36,250.

After that, the charge rises to 10% up to £1.5 million and 12% on anything above that.

From November relief was increased for first-time-buyers meaning they pay no stamp duty on properties worth up to £300,000 and, for properties costing up to £500,000, they pay no stamp duty on the first £300,000.

According to research by Estate Agent Today, there have been 12 different stamp duty reforms since the Millennium. Since 2014 reforms introduced by the then-Chancellor George Osborne appear to have cost the UK Treasury £317m during the second quarter of this year.

When stamp duty was first introduced in the 1950s, homeowners paid nothing on a property up to £30,000 and then just 1% of the purchase price above that threshold. With the average home valued at £20,000, very few paid any stamp duty at all. Today the cost of stamp duty is significantly more expensive in both absolute and relative terms.

We’ll have to wait till the Autumn Budget to see if further stamp duty reforms are planned.

    Posted 6th September 2018


    Vicky BibirisManaging Director

    Vicky started with Location Location as a junior negotiator in 2006 and within a short period of time became the top performing sales consultant in the company taking on the role of Branch Manager in 2009. Vicky's exceptional ability is backed up by her infectious enthusiasm for people and property, this led to her becoming Sales Director and equity partner in 2012. Vicky has been an integral part in establishing Location Location's reputation as one of North London's leading estate agents.