Taxman rakes in £1.1bn from stamp responsibility final month – the second largest February on report
- From 1 April stamp duty costs are set to rise for people buying property
Homebuyers paid £1.1billion in stamp duty last month, Coventry Building Society’s analysis of latest His Majesty’s Revenue and Customs figures show.
The mutual says this was a 24 per cent increase on the £848million paid in January, fuelled by a rush in activity as buyers race to beat the fast-approaching stamp duty hike.
It also represented only the second time that stamp duty receipts have topped £1billion in February since records began in 2008.
Buyers now have just 10 days until 1 April, when the nil-rate threshold, under which no stamp duty is paid, drops from £250,000 to £125,000, returning to where it was before temporary changes were made in 2022.
It will increase the tax bill on the average-priced home in England from £2,028 to £4,528.
First-time buyers have a higher threshold, but this will also drop from £425,000 to £300,000.
The average first time buyer home in London is £473,282, meaning the stamp duty bill for a typical first time buyer in the capital will shoot from £2,414 to £8,664, according to Coventry.
> Check how much stamp duty YOU will pay under the new rules
Increasing costs: From 1 April stamp duty will rise for many home movers, first-time buyers and second home buyers
Jonathan Stinton, head of mortgage relations at Coventry Building Society, said: ‘Buying a home is about to get a lot more expensive. Those in the middle of the buying process will be racing against time to beat the deadline.
‘Those who can’t get the keys to their new house in the next ten days need to brace themselves for a hit, potentially amounting to thousands of pounds.
‘The pressure of the deadline will be felt by buyers across the market, with some having to make tough financial decisions in the weeks ahead.’
Landlord surcharge also adds to tax take
The rise in the stamp duty take in February was also partly down to the increased surcharge paid on second properties.
The Chancellor delivered a blow to second home buyers and landlords when she increased this in the Autumn Statement.
These buyers already faced a 3 per cent surcharge beyond what those purchasing a property to live in currently pay.
However, from 31 October last year, that went up to 5 per cent, adding thousands of pounds to the cost of buy-to-let and second home purchases.
Under previous rules, a £300,000 property with the surcharge included would cost £11,500 in stamp duty.
That then rose to £17,500 with the surcharge increase, and will be rising to £20,000 from 1 April.
Property experts are anticipating that activity in the property market will fall back after the deadline passes.
Sinton added: ‘With buyers needing to factor in extra tax we expect to see a shift in demand, slower sales, and a knock-on effect on house prices.’
Jeremy Leaf, north London estate agent and a former chairman of the Royal Institution of Chartered Surveyors, says that while some home sellers may be willing to renegotiate, other purchases will fall through after 1 April.
‘There is no question that many people brought forward their purchases in order to take advantage of the stamp duty concession before it became impossible to do so at the end of this month,’ said Leaf.
‘Of course, those who don’t make the deadline may have an opportunity to make a similar saving if the vendor is minded to move on the price, depending of course on their ongoing purchase.
‘But some will fall by the wayside and the tax take is almost inevitably likely to fall, at least for the first few months until the market finds a new normal.’
Some mortgage lenders are now offering cashback mortgages designed specifically to give a financial boost to those who complete after the deadline.
Amy Reynolds, head of sales at Richmond estate agency Antony Reynolds thinks there is a strong economic argument that higher stamp duty could ultimately reduce HMRC’s total tax take, even if short-term receipts have risen.
‘Stamp duty is a transactional tax, meaning the revenue it generates depends on the volume of property sales.’ said Reynolds.
‘While higher rates can boost tax receipts in the short term – especially if people rush to complete purchases before further potential increases – the long-term impact can be counterproductive.
‘If the cost of moving becomes prohibitively high, people are less likely to buy and sell homes, leading to a stagnation in the market.
‘This isn’t just a theoretical risk. Previous hikes in stamp duty, particularly at the higher end of the market, have slowed transaction volumes. London, for example, saw a sharp decline in sales after the 2014 stamp duty reforms, despite rising property prices.’
