Stamp duty fees topped £8.3bn in 2016

Stamp duty increases

Buying a new home has always come with its fair share of financial obligations and pressures, but new research from Lloyds Bank has found stamp duty is a significant burden for house buyers.

According to the bank, £8.3 billion of stamp duty was paid in 2016 alone, with it applying to all house purchases over £125,000 and operating on a sliding scale. House buyers pay two per cent stamp duty between £125,000 and £250,000, and five per cent on the value of the property above £250,000.

As house prices have increased in recent years, the amount of stamp duty being paid by purchasers has increased significantly – 17 per cent year-on-year. The figure is £2bn more than the stamp duty paid at the peak of the housing boom in 2007.

Andrew Mason, Lloyds Bank mortgage products director, said: "Rising house prices have caused stamp duty payments to continue to increase, despite the reforms that came into effect from December 2014.”

Universal impact

Stamp duty is paid on all house purchases over £125,000, which means its introduction has impacted almost the entire housing market, from first-time buyers (FTBs) looking to get onto the property ladder, to downsizers, looking to buy a smaller home.

Despite, the universal impact of stamp duty on house buyers, regional discrepancies have developed as some regions have seen more marked house price increases.

According to the Lloyds Bank data, the lowest stamp duty bills are experienced by buyers in the North East (£4,212) and Wales (£4,489), with just 72 per cent of property sales in the North surpassing the £125,000 lower limit for stamp duty.

The number of first-time buyers now paying stamp duty has also dramatically increased, with 78 per cent of people taking their first step onto the property ladder now paying stamp duty, a significant increase from 2001, when only 47 per cent of FTBs would have paid the tax. Across a lifetime the average home buyer will pay £12,693 in stamp duty as they move up the property ladder.

Coping with stamp duty

Despite house price increases losing momentum in recent months and the prediction that rises will continue to slow, the housing market remains robust and property prices are expected to continue rising. This will inevitably lead to more properties passing the £125,000 stamp duty threshold and stamp duty increasing on more valuable properties.

As a result, it is important those looking to buy properties take steps to try and reduce the impact of the tax on their purchase. The first step is to be aware of stamp duty from the start of the buying process, making sure to budget for a bill when it comes to completion.

There are also several mortgage products available on the market that provide cashback incentives, which will help to cover the cost of stamp duty and ensure those early days in a new home are filled with happiness and not financial concerns.

If you’re considering buying your first property and need some help with your finances, use our mortgage calculator, created with the Mortgage Advice Bureau, to work out the best deal for you.