Government urged to review stamp duty as more first-time buyers now pay the tax

Renewed calls are being made for an “urgent review” of stamp duty as research shows rising house prices mean first-time buyers are no longer benefiting from exemptions.

Analysis of Land Registry and HMRC data by the HomeOwners Alliance has found that house prices have soared by around £100,000 between 2014 and 2022, but stamp duty bands have not changed.

Additionally, average house prices have grown by £60,000 since the £300,000 first-time buyer stamp duty relief was introduced in November 2017, the HomeOwners Alliance said.

Its research found that 30% more first-time buyers are now paying stamp duty than when the first-time buyer relief was first introduced five years ago.

One in four (26%) of all first-time buyers now pay stamp duty despite the exemption.

The analysis also found that soaring house prices now mean almost one in five more homebuyers have been pushed into paying higher stamp duty bands.

It found that 44% of transactions now fall in bands above £250,000 up from 38% two years ago, while an additional 31,500 transactions are now subject to the tax.

To address this, the campaign group suggests the government should raise the exempt threshold and bands by 100,000 in line with house price growth.  

The first-time buyer relief should be raised to £350,000 as a minimum, the HomeOwners Alliance said, and the thresholds should rise annually in line with price growth.

Another more radical suggestion, based on HMRC data showing that property investors make up almost half of stamp duty receipts, is to simplify the surcharge so homebuyers purchasing a home to live in should not have to pay the tax.
 

The HomeOwners Alliance said: “The current system means that those who have inherited a property, who are going through a separation, or who own a rental property have to pay the surcharge on the main property they intend to live in. 

“The change would align stamp duty with capital gains tax, which does not apply gains on primary residences.”

Commenting on the data, Paula Higgins, chief executive of the HomeOwners Alliance said, “It’s clear that the stamp duty tax needs to be reviewed to ensure it’s facilitating rather than fettering first-time buyers.

“Against a backdrop of soaring house prices, cost of living crisis and increased tax burden, first-time buyers of a home worth £400,000 are being hit with stamp duty bills of £5,000.

“Alongside announcing new initiatives to increase homeownership, the government needs to increase the existing first-time buyer relief threshold. The relief was introduced in 2017 to reduce the upfront costs for first-time buyers. Fast forward five years and there is a real risk first-time buyers become a taxation cash cow, which can’t be right.”