Stamp duty is the tax payable when buying a property worth over £125, 000, and the surge in house prices up to 2008 has meant that people who now want to move are facing an increased burden. Changes in the rate and scope of the duty have also exerted additional pressure on home owners.
According to a report by the HomeOwners Alliance, stamp duty has jumped ten-fold in the past several years. The average amount paid was £532 in 1995/6 while in 2011/12, it had rocketed to £5,957. The escalator kicks in from £150,000 in areas deemed to be disadvantaged.
While house buyers do not have to pay the tax for homes up to £125,000, there is an escalating scale for homes beyond that price, which ranges from one per cent between £125,000 and £250,000 and up to seven per cent for properties worth in excess of £2 million.
The report shows that stamp duty has risen 7.1 times faster than inflation, 6.5% faster than average earnings and 4.6% faster than house prices since 1995/6.
This means that for hard-pressed home owners wanting to move, it will take them longer to get themselves ready to do so. Average stamp duty paid is now equivalent to eleven weeks salary; in 1995/6 it was a very much more manageable eight days average earnings, according to The HomeOwners Alliance.
Clearly, this tax burden increases the feeling for a lot of people that it is not worth moving. It is a lead weight in the market. Since 1997 the number of stamp duty bands has increased from one to five per cent and the highest rate of stamp duty has increased from one to seven per cent.
The Alliance suggests increasing stamp duty for buy-to-let properties and second homes to fund reductions for those just buying a home to live in.
The present stamp duty regime is one possible reason why in a country that has for so long been in love with the concept of home ownership, the numbers of home owners is falling. As well as the economic uncertainty faced by people considering moving, they are reminded that, when push comes to shove, they also have to pay a very large amount in tax.
People weigh up their options and avoid paying stamp duty by staying put, investing in a new kitchen or bathroom, adding an extension, converting their garages and increasingly, digging out their basements.
The housing market, which had certainly been boosted in 2013 by the Governments laudable finance schemes to get people moving, may arguably have a greater impact if these same home owners were not so stringently taxed.
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