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Study finds first time buyers losing out due to stamp duty

Study finds first time buyers losing out due to stamp duty (News (General))

by administrator @, Tuesday, August 06, 2013, 15:11

More than a quarter of home buyers are now paying stamp duty at the higher rates of 3 per cent or more, according to new research.

A study by the TaxPayers’ Alliance has found that hundreds of thousands of first-time buyers and hardworking families are losing out to the tune of more than £7,500 when they move home.

The pressure group launched a Stamp Out Stamp Duty campaign calling for a cut in the ‘punitive’ levy, which raised £4billion for the Treasury in 2012/13 - some £3.6billion of which was collected at rates of 3 per cent or more.

They say it is unfair that rising house prices mean that a greater proportion of homes are coming into the net of the higher levies because the thresholds have stayed static for years.

Sales of residential properties are free of stamp duty up to the value of £125,000 and attract a 1 per cent tax between £125,000 and £250,000.

But rising house prices mean that more and more purchasers are paying at the higher rates of 3 per cent applied to homes worth between £250,000 and £500,000.

A rate of 4 per cent is charged on those valued at up to £1million, 5 per cent on those between £1-£2million and 7 per cent beyond that point.

Matthew Sinclair, chief executive of the TaxPayers’ Alliance, said: “Owning your own home is an important milestone, but for many families it seems harder and harder to reach.

“Ministers have done nothing to ease the burden imposed by stamp duty, which is an unfair double tax that gets in the way of would-be first-time buyers and others thinking about moving. Instead they have made things worse with new thresholds and new, higher rates.

“The Government needs to act on ministers’ rhetoric about getting people onto the property ladder and cut this unfair tax.”

The research found that home-buyers in London and the South East are the hardest hit but an increasing number of people in other parts of the country are being hit by stamp duty at the 3 per cent rate.

The group argues that stamp duty acts as a barrier both for an increasing number of first-time buyers and existing home-owners wanting to move house to get a new job, be near to relatives or accommodate a growing family.

Because stamp duty is imposed on the total value of the property, and not just the portion of the price which is above the threshold, families buying a home for between £250,000 and £500,000 pay between £7,500 and £15,000.

In England and Wales, some 723,829 homes were bought in 2012/13, with more than 25 per cent (182,692) being liable for stamp duty at a rate of 3 per cent or more.

Stamp duty rates of 3 per cent or more were imposed on 65 per cent of all residential transactions in London, and 39 per cent in the rest of the South-East.

The figure was 27 per cent in the East of England, 24 per cent in the South-West, 12 per cent in the West Midlands and 10 per cent in the East Midlands, according to the TPA research.

In the north, the figures were much lower: 9 per cent in the North-West, Yorkshire and the Humber, and 6 per cent in the North-East.

Some 8 per cent of Welsh homes attracted the higher levies. The TPA did not look at Scotland.

The recent 2020 Tax Commission review by the TPA and the Institute of Directors concluded that stamp duty should be abolished, as did the Mirrlees Review from the Institute for Fiscal Studies.

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