The rising cost of moving home

Homebuyers pay more than a fifth of their annual salary on stamp duty

The cost of moving home is increasing for many families, according to new research. Homebuyers are paying more than a fifth of their annual salary on stamp duty in almost a third of local authorities across Britain.

This is a significant rise on the position just five years ago, when homebuyers in just 5 per cent of local authorities would face costs this high when purchasing property.

This problem has occurred because stamp duty thresholds have remained virtually unchanged, while house prices have risen sharply over the past decade.

As a result, there has been a dramatic increase in the number of properties that now fall in the higher stamp duty bands, according to Halifax, Britain's largest lender.
According to the bank the average homebuyer paid a stamp duty bill of £1,971 last year, equivalent to 7 per cent of average annual full-time earnings.

In contrast the average person buying a house in 2002 paid stamp duty of £1,211, just 5 per cent of average earnings.

Homebuyers currently pay no stamp duty on properties valued up to £125,000. They pay 1 per cent of the total value of their property on homes priced between £125,000 to £250,000.

This rises to 3 per cent of the total value on homes worth £250,000 to £500,000, and to 4 per cent on properties valued at more than £500,000.

The higher stamp duty thresholds have not been altered since their introduction a decade ago. In the 2005 Budget the government doubled the threshold for stamp duty to £120,000, taking 430,000 transactions out of Stamp Duty entirely. Last year, the threshold was increased further to £125,000, exempting another 40,000 homebuyers each year from Stamp Duty.