First introduced to fund a war against France, stamp duty has certainly been hitting the headlines recently. Newly released research has highlighted how many homebuyers could benefit each year should the government permanently increase the tax thresholds.
There’s no denying that the current stamp duty holiday has helped boost demand amongst homebuyers, with 85% of buyers benefitting from paying no stamp duty since the reprieve was introduced in July of last year.
However, many believe that the archaic tax should be scrapped completely, acting as nothing more than an additional financial hurdle for already hard-pressed homebuyers.
While this is unlikely to happen, lettings and estate agent, Benham and Reeves, looks at how increasing the tax-free price threshold could help the nation’s homebuyers.
The firm analysed residential property market transactions to have completed throughout 2020 and found that, had the current holiday been in place for the duration of the year, it would have seen 86% of homebuyers across England pay no stamp duty.
405,358 transactions would have paid no stamp duty at all, compared to just 62,695 transactions had stamp duty rates remained at normal levels.
With no holiday in place at all, homebuyers would have paid up to the tune of £4.1bn while this would have fallen to just £1.7bn had the holiday been in place for the full 12 months. Had this been the case, it would have saved homebuyers a huge £2.4bn.
Increasing the threshold at which no tax is owed to £750,000 would see 95% of all transactions pay no stamp duty, while even a reduction to just £350,000 would still benefit 71% of all homebuyers across England.
Should the current stamp duty holiday rates be kept in place, it would have contrasting benefits for each region.
Across London and the South East, it would reduce the overall stamp duty paid by £592.8m and £613.1m respectively, the biggest savings of all regions. While in the North East, Yorkshire and North West between 97%-98% of all buyers would pay no stamp duty at all.
Marc von Grundherr, Director of Benham and Reeves, commented: “Stamp duty tax really acts as the property market definition of rubbing salt in the wound. After months, even years, of saving to get a foot on the ladder, homebuyers are then hit with thousands more in tax owed to the government.
"Other than the monumental failure to deliver on their housing promises, it’s hard to see what involvement the government actually has in the housing market and so calls for stamp duty to be scrapped are extremely valid ones indeed.
"But, of course, they will fall on deaf ears and homebuyers will continue to pay up for the pleasure of owning their own home. However, if the government were simply willing to meet in the middle and keep some level of stamp duty relief in place, the benefit to the market as a whole would be huge.
"Even increasing the lowest tax band to £350,000 would be a marked improvement and would go some way in helping beleaguered home buyers to get a foot on the ladder and to continue climbing it once they have.”