Homebuyers in England and Wales are typically paying £4,500 less in stamp duty than before the government overhauled the system a year ago, according to research by Halifax.
The switch from a “slab” structure to a progressive tax, where buyers only pay each higher rate of tax on the portion of the price that goes over each threshold, was the surprise measure in 2014’s autumn statement.
The change, which benefits anyone spending less than £938,000 on a property, has reduced the bill on an average-priced house by more than half, the UK’s largest lender said. Buyers who spend £273,531 on a home – the average price drawn from data from Halifax, HMRC and Land Registry – now face a bill of £3,676, compared with £8,205 under the old system.
The bank said the change had made an impact on sales at the top end of the market, with the number of transactions on homes costing more than £1.5m dropping by 20%, compared with a 10% fall in sales below the £938,000 level.
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Had the £125,000 threshold at which the duty starts risen in line with house prices since it was set in 2006, it would now stand at £157,000.
Between August and October across England and Wales, just under a third of purchases by first-time buyers were of homes costing less than £125,000, so there was no stamp duty to pay. However, in London not a single first-time buyer purchase was free of stamp duty, and the average price paid by new entrants to the market was £381,022.
During 2014-15, UK homebuyers paid a total of £7.5bn in stamp duty, Halifax said, comfortably more than the previous record of £6.7bn in the housing boom of 2007-08. The increase has been driven by rising prices, particularly in London, where stamp duty receipts were just over £3bn during the year, compared with £1.9bn in 2007-08.
Craig McKinlay, the mortgages director at Halifax, said the changes made to stamp duty a year ago had been of significant benefit to many buyers.
However, he added: “The failure to index the start point for stamp duty in line with house price inflation has dragged more buyers into the tax net in recent years.Buyers in London have been particularly badly affected with the capital accounting for an increasing and disproportionately large share of stamp duty revenues.”
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