Stamp Duty payments soar: Are Brits paying too much?
The government has released their official Stamp Duty Land Tax statistics for the 2021/22 financial year, finding that payments for the levy – commonly charged on the purchase of a property – have soared by 63% compared to 2020 from £8,670m to £14,100m. This exponential rise comes amidst Britain’s housing market boom as prices soared to record highs throughout 2022. However, according to research from stamp duty specialists, Cornerstone Tax, 13% of Brits say that as a homebuyer, they feel that they were forced to pay too much stamp duty in error due to their solicitor. Group chairman of the firm, David Hannah, highlights that during a cost of living crisis, it is vital that both prospective homeowners and commercial landlords are not overcharged at a time when affordability levels are at their worst.
The biggest increases were seen in the residential sector, rising by 69% between financial year 2020 to 2021 and 2021 to 2022, from £6,010m to £10,170m. For many, stamp duty is an often overlooked or misunderstood topic, and serving as testament to this, data from Cornerstone Tax even found 14% of Brits have been forced to take out short-term loans or emergency credit to cover the cost of unexpected stamp duty payments. Non-residential SDLT receipts are also on the rise too, increasing by 48% between financial year 2020 and 2022, from £2,660m to £3,930m. This comes at a time when landlords and property developers are vital in both helping to stimulate stock levels in the market, and providing a much-needed boost to the economy through construction and transactions.
London remains the area with the highest amount of SDLT receipts between 2020 and 2022, accounting for £5,085m or 36% of total SDLT receipts. Though the capital leads the way in terms of the value of property transactions, every region across the UK experienced a rise in non residential receipts, ranging from a 32% rise in the East Midlands (from £200m to £265m), to a huge 80% rise in the North East (from £50m to £90m). This will come as encouraging news for the government as it is indicative of increased commercial activity and development outside of the South East.
Plans to cut stamp duty were announced as part of the infamous mini-budget in order to aid economic growth by allowing more people to move homes and provide first-time buyers with a better chance to get on the property ladder. One of the few announcements which the government hasn’t U-turned on, the change saw the stamp duty threshold – the price at which buyers have to begin paying the levy – double from £125,000 to £250,000. A measure will was also introduced which makes first-time buyers exempt from stamp duty on properties up to £425,000 and only having to pay 5% on the remaining value between £425,001 and £625,000. Overall, the steps taken mean that 200,000 people will be relieved of paying stamp duty altogether.
David Hannah, group chairman at Cornerstone Tax discusses the stamp duty tax gap: “It comes as no surprise to see that stamp duty payments have soared over the past two years – this is indicative of the price and activity boom which we saw in the housing market during this period. It will come as encouraging news to the government that there has been an 80% rise in non-residential SDLT receipts in the North East as this suggests an increasing amount of commercial activity outside of the South East and is a hot topic at the moment with the levelling up agenda. However, at a time when both residential and commercial property owners are seeing their budgets slashed due to the current economic climate, it’s vital that people are not overpaying on stamp duty.
“It is often unfortunately an area that is overlooked or misunderstood – our data even found that almost 1-in-7 homeowners feel they paid too much stamp duty in error, with a further 61% admitting they have never stopped to consider whether their payment was in fact correct. Commercial developers and smaller-scale landlords are also hugely important in the market currently in terms of providing stock amidst a severe shortage, so it’s of the utmost importance they are not overpaying alongside prospective residential buyers.”
