Moneyfacts.co.uk will never contact you by phone to sell you any financial product. Any calls like this are not from Moneyfacts. Emails sent by Moneyfacts.co.uk will always be from firstname.lastname@example.org. Be Scamsmart.
Whether you're buying your first home, moving up the ladder or downsizing, there's one tax that always needs to be paid – stamp duty. Despite the reforms introduced in 2014, we're still paying thousands of pounds a time for this extra tax, with Lloyds Bank finding that it added up to a collective £8.3 billion in 2016.
This £8.3 billion total marks an increase of 17% compared with the previous year – when homebuyers paid £7.1 billion in stamp duty – and more than £2 billion higher than the peak of the last housing boom in 2007. It adds up to a hefty amount on an individual basis, too, with calculations showing that the average homeowner pays £12,693 on stamp duty in their lifetime as they work their way up the housing ladder, and rising house prices have a lot to answer for.
Lloyds Bank estimates that a typical first-time buyer (FTB) would have paid an average stamp duty of just £758 in March 2001, followed by £1,989 for their second home in March 2009 and a whopping £9,946 for their final step in March 2017. More buyers are now coming under the stamp duty bracket, too, as while only 47% of FTBs would have paid stamp duty in 2001, that proportion has rocketed to 78%.
"Rising house prices have caused stamp duty payments to continue to increase, despite the reforms that came into effect from December 2014," said Andrew Mason, Lloyds Bank mortgage products director. "This average, however, disguises substantial regional differences with homemovers, with those in Greater London paying over £40,000 [as they move up the ladder]. Escalating stamp duty payments have contributed to significant increases in moving costs in recent years."
As Andrew points out, there are dramatic regional variations. The highest overall stamp duty bills are faced by buyers in London and the South East, with homebuyers in the capital paying a total of £40,576 as they move up the ladder – a whopping 320% more than the national average – while the bill hits £20,133 for those in the South East.
Conversely, the lowest bills are in the North (£4,212) and Wales (£4,489), while fewer actually have to pay stamp duty in the first place: just 72% of homeowners in the North and 78% in the West pay the tax, compared with 99% of those in the South East and 100% in Greater London. These differences are undoubtedly due to the varying house prices of each region, which highlights the North/South divide to sharp effect.
While it's not always that easy to change location for the sake of lower house prices, there are still ways you can cope with the rising cost of stamp duty, and one of them is making sure you've saved up enough to cover the bill. Another option could be to use some of the equity you've built up in your home when remortgaging to cover the cost, or you could be on the lookout for a mortgage deal that offers cashback as an incentive.
At the very least, you want to make sure all future house-related payments are as low as possible, which is why finding the best mortgage rate is essential. Check out our Best Buys or use our mortgage calculator to get started, and see if you can go some way to offsetting the rising cost of stamp duty.
Use our mortgage calculator
Find the best savings rates to build your stamp duty fund
Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time. Links to third parties on this page are paid for by the third party. You can find out more about the individual products by visiting their site. Moneyfacts.co.uk will receive a small payment if you use their services after you click through to their site. All information is subject to change without notice. Please check all terms before making any decisions. This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.