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First-time buyers branded a ‘cash cow’ for Treasury coffers

Written by: Sarah Davidson
The government must urgently raise the tax-free stamp duty band by £100,000 and consider scrapping the tax altogether to prevent first-time buyers from becoming a “cash cow”, a campaign group has argued.

The HomeOwners Alliance has published analysis showing that while house prices have soared by around £100,000 between 2014 and 2022, stamp duty bands have not changed.

By freezing these bands, more and more homebuyers have been forced to pay thousands of pounds in stamp duty, making it even harder to get on the property ladder or move up it to make way for first-time buyers.

The research shows one in four first-time buyers now pays stamp duty alongside having to raise ever larger cash deposits as house prices continue to climb at around 10% a year.

This is up by almost a third since the government introduced an exemption waiving stamp duty for first-time buyers for properties worth up to £500,000 after 22 November 2017.

Soaring house prices now mean one in five more homebuyers have been pushed into paying higher stamp duty bands, with 44% of transactions now falling in bands above £250,000, up from 38% two years ago.

It means an additional 31,500 transactions are now subject to stamp duty, compared to two years ago.

A quarter of all properties liable for stamp duty are now in bands above £500,000, up from 16% two years ago, with buyers paying rates between five and 12%.

‘Facilitating rather than fettering first-time buyers’

Paula Higgins, chief executive of the HomeOwners Alliance, said: “It’s clear that the stamp duty tax needs to be reviewed to ensure it’s facilitating rather than fettering first-time buyers.

“Against a backdrop of soaring house prices, cost-of-living crisis and increased tax burden, first-time buyers of a home worth £400,000 are being hit with stamp duty bills of £5,000.”

She argued that alongside announcing new initiatives to increase homeownership, the government needs to increase the existing first-time buyer relief threshold.

“The relief was introduced in 2017 to reduce the upfront costs for first-time buyers. Fast forward five years and there is a real risk first-time buyers become a taxation cash cow, which can’t be right,” she said.

Higgins is calling on the government to “be bold and scrap stamp duty entirely” for those buying a home to live in.

“Falling short of that, we ask the government to raise the exempt threshold and bands by £100,000, in line with house price growth,” she said.

“These bands have not changed in eight years but the average UK house price has risen approximately £100,000 in that time, from £180,000 in 2014 to just under £280,000 in 2022.”

The amount paid in stamp duty between April 2021 and March 2022 was up by £6.1bn on the previous tax year, reaching a record high of £18.6bn.

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