8 in 10 Londoners now pay stamp duty on their first home
Key Points
- Property platform Zoopla has revealed that 8 in 10 Londoners buying their first home face a stamp duty bill.
- The data shows a clear North-South divide, with less than one in 10 first-time buyers paying stamp duty in the North.
- Median stamp duty bills are higher across the South and in London, and this has effectively created two different stamp duty taxes depending on where you buy a home in England.
- Zoopla has pointed to fiscal drag as a factor impeding house buyers, as the stamp duty threshold for home movers has remained unchanged since 2014.
Frozen stamp duty thresholds mean that 79.7% of first-time buyers in London today face a stamp duty bill, compared with less than one in ten in the North.
New research from online property platform Zoopla has revealed a stark difference in how stamp duty affects first-time buyers and home movers in the South and North of England.
For first-time buyers, a stamp duty land tax of 5% applies when they purchase a home, but they receive full exemption up to a threshold of £300,000, with the tax applying only to the excess above this amount.
However, this relief completely disappears at £500,000, meaning that while a property at £499,000 costs £9,950 in stamp duty, a property at £501,000 costs £15,050.
Home movers enjoy no such relief, with a 2% rate applying on the portion between £125,000 and £250,000, then 5% on the portion between £250,000 and £925,000.
Nationally, 38% of first-time buyers pay stamp duty, but looking at regional data reveals a stark North-South divide.
A tale of two taxes
Zoopla said that the significant difference in average prices in England now means that stamp duty effectively operates as two entirely different taxes depending on where you buy in the country.
In London, where property prices are highest, eight in ten first-time buyers pay stamp duty on their first home, with a median stamp duty bill of £8,750. In the South East, it is 51% of first-time buyers who pay stamp duty, with the median bill at £4,500.
Stamp duty in the South of England is applied widely, affecting the majority of first-time buyers and more than 90% of home movers.
In the North East, however, just 2.1% of first-time buyers pay stamp duty, with the median bill at £3,750. In Yorkshire and the Humber, 3.8% of first-time buyers are liable for stamp duty, and the median bill is just £2,500.
Even when calculating the rate of stamp duty paid per pound, buyers in the South and London face higher real stamp duty rates on their property purchases than those in the north.
The table below shows stamp duty costs and payment rates across England, based on research from Zoopla.
| Region | FTBs paying | FTB median bill (where paid) | FTB rate per £ | Home movers paying | Home mover median bill (where paid) | HO rate per £ |
|---|---|---|---|---|---|---|
| North East | 2.1% | £3,750 | 1.0p/£1 | 63.5% | £1,500 | 0.8p/£1 |
| Yorks & Humber | 3.8% | £2,500 | 0.7p/£1 | 82.8% | £2,200 | 0.9p/£1 |
| North West | 6.2% | £2,500 | 0.7p/£1 | 84.0% | £2,200 | 0.9p/£1 |
| W Midlands | 9.3% | £2,500 | 0.7p/£1 | 90.4% | £3,250 | 1.2p/£1 |
| East Midlands | 12.2% | £2,500 | 0.7p/£1 | 91.5% | £3,000 | 1.2p/£1 |
| South West | 21.2% | £2,500 | 0.7p/£1 | 92.5% | £5,000 | 1.7p/£1 |
| South East | 51.0% | £5,000 | 1.3p/£1 | 96.6% | £11,250 | 2.7p/£1 |
| Eastern | 52.0% | £4,500 | 1.2p/£1 | 96.4% | £10,000 | 2.5p/£1 |
| London | 79.7% | £8,750 | 1.8p/£1 | 99.1% | £20,000 | 3.3p/£1 |
The data shows that for home movers in the UK today, stamp duty has become an inevitability, although the more expensive rates paid by those in the South may discourage people from buying second homes and therefore freeing up new starter homes for first-time buyers.
Zoopla noted that stamp duty has not kept pace with house prices, which has resulted in its cost ballooning over time. The current £250,000 threshold for home movers was first introduced in 2014, and if it was adjusted in line with today’s house prices, it would be at £380,000.
This adjustment would save the average person moving home up to £6,500 in stamp duty if they were buying a house priced between £250,000 and £380,000.
“Where you’re buying determines what you pay in stamp duty if you’re a first-time buyer. In the North and Midlands, the £300,000 takes nine in ten first-time buyers out of paying anything extra to buy their home,” said Zoopla executive director Richard Donnell.
“In London and the South East, the cost of buying an average first time buyer homes is above £300,000 for many buyers which means the majority of first-time buyers face a stamp duty bill on top of an often sizable deposit.”
“For home movers, stamp duty is a near-certain cost wherever you live – and in Southern England it runs to five figures.”
“Six in ten property purchases are made by existing homeowners. When the cost of moving becomes a meaningful friction, some of those moves don’t happen, especially with lower levels of house price inflation in recent years across southern England,” he said.
