Stamp duty receipts slumped 23% to £13.8bn between last April and February in England compared to the same period a year ago, according to official data.
The levy was £4.2bn lower due to due to a fall in property sales, “market uncertainties surrounding the Covid-19 pandemic” and the temporary introduction of reduced stamp duty rates, says HMRC.
In February, homebuyers paid £781m in stamp duty, making it a total of £1.6bn so far this year, according to further analysis by Coventry Building Society.
UK home transactions fell 20% in January year-on-year, HMRC revealed earlier this year, as high interest rates curtailed borrowers’ appetite to move house.
Also, the then Chancellor Kwasi Kwarteng in the mini-Budget on 23 September 2023 introduced permanent stamp duty cuts that saw the nil-rate band being doubled to £250,000, the first-time buyer threshold rise to £425,000, as well as the value of a property on which FTBs can claim relief was upped to £625,000.
But these changes were made temporary until March 2025 by current Chancellor Jeremy Hunt in November 2023.
Future homebuyers have a year left to avoid a stamp duty hike that will see an average priced home in England set to jump by £2,500 after March 2025, Coventry Building Society points out.
The mutual’s head of intermediary relationships Jonathan Stinton points out: “Many new buyers will have to dip into their deposit and borrow more just to cover the tax on their home.
“It’s a double hit because this hike is not only going to add thousands of pounds to peoples’ tax bills next year, it’s also going to cost buyers thousands of pounds in extra interest over the life of their mortgage.
“Some buyers will still be paying for this tax hike decades down the line.
Stinton adds: “The failure to make any meaningful changes to stamp duty in the Spring Budget was a blow to homebuyers when there was so much more which could have been done to make this tax better for everyone.
“The Chancellor ignored this opportunity when he could have really got creative and introduced waivers for downsizers, incentivised energy-efficient home improvements, or come up with fluid thresholds which move in line with inflation. Instead, no substantial changes were made and the clock is ticking for future homebuyers.”
The firm says, as a basic guide, someone borrowing an extra £2,500 more to cover the additional tax on their home will pay £4,278 more over the term of a 25-year mortgage, based on a rate of 4.75%.
