Stamp duty for first-time buyers doubles in just five years

The average stamp duty bill faced by first-time buyers has nearly doubled during the past five years figures showed today.

People taking their first step on to the property ladder paid average stamp duty of £1,751 in 2007, 82 per cent more than the £960 they paid in 2002, according to Britain's biggest mortgage lender Halifax.

A North/South divide on the level of the tax paid by first-time buyers is also developing.

The average person buying their first home in London, the South East, South West and East paid stamp duty in 99 per cent of local authorities during 2007, while in northern regions people were liable for it in just 42% of areas.

At the same time nearly one in five first-time buyers in the South paid the tax at the higher 3 per cent and even 4 per cent rate, compared with just 2 per cent five years ago, while there were no regions in the North where the average first-time buyer paid the tax at these levels.

Stamp duty is paid when people buy a property, with the tax charged at 1 per cent of a property's value on homes worth between £125,000 and £250,000, rising to 3 per cent on homes worth between £250,000 and £500,000 and 4 per cent for properties worth more than £500,000.

Unsurprisingly, people buying their first home in London were most likely to be liable for stamp duty at one of the higher rates, with first-time buyers in nearly two-thirds of London boroughs paying the tax at the 3 per cent or 4 per cent rate in 2007.

Most first-time buyers in the capital paid stamp duty at the 3 per cent rate, facing an average bill of £8,675, the equivalent of 21 per cent of average full-time earnings in London.

But at the other end of the scale there were four regions of the country in 2007 where the average first-time buyer paid no stamp duty at all.

These regions were the North, Yorkshire and the Humber, Scotland and Wales, where people taking their first step on to the property ladder on average bought homes costing less than the £125,000 at which the tax kicks.

Martin Ellis, Halifax chief economist, said: "Stamp duty has again become an issue for first-time buyers because the stamp duty thresholds have not kept pace with house price inflation.

"First-time buyers in the south are most likely to pay but so too are a growing percentage in the north.

"The Government has raised the 1 per cent threshold in recent years, unfortunately, more needs to be done.

"We call on all political parties to raise the stamp duty thresholds to compensate for house price inflation over the past decade and to commit to index the thresholds for house price inflation in the future."

Halifax said if the stamp duty threshold had increased in line with house price inflation people would only be liable for the tax if they bought a property worth more than £191,000, while the 3 per cent rate would start at £720,000 and the 4 per cent one would kick in at £1.4 million.

But a Treasury spokesman said: "Half of all first-time homebuyers and around two-fifths of all homebuyers will pay no Stamp Duty Land Tax this year.

"What's more, as a result of threshold increases made by the Government, five out of six homebuyers pay stamp duty at 1 per cent or pay none at all.

"In the 2005 Budget the then Chancellor doubled the zero-rate threshold to £120,000, taking 430,000 transactions out of stamp duty entirely.

"Last year, the Chancellor increased the threshold further to £125,000, exempting an additional 40,000 homebuyers each year from stamp duty."

He added that no previous administration had ever linked tax thresholds - including stamp duty thresholds - to the price movements of any particular asset, such as housing, and the practice of this Government was no different.