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Halifax has compared the average residential stamp duty land tax bill in 405 Local Authorities (LAs) in Great Britain with average full-time gross earnings by LA over the 5 years from 2002 to 2007. It has found - using its own house price database, as well as ONS and HM Revenue and Customs statistics - that home buyers in 29% (118 out of 405) of local authorities (LAs) have a stamp duty bill equivalent to more than 20% of average annual gross earnings, compared to only 5% (19) of local authorities five years ago.
The average residential stamp duty bill in the UK is equivalent to 7% (£1,971) of annual full-time gross earnings compared to 5% (£1,211) in 2002. In the South East, the proportion has increased from 7% to 23%.
The average home buyer in the majority of LAs in London (91%) and the South East (61%) has a stamp duty bill that equates to more than 20% of local average annual earnings.
Meanwhile, the number of properties in the higher stamp duty bands has increased dramatically in the past five years - the number of properties in the UK valued above £250,000 having increased by 201% from 1.8 million in 2002 to 5.5 million in 2007.
Homebuyers in Chichester have seen the biggest rise in stamp duty bills as a percentage of earnings over the past five years; from 7% in 2002 to 37% in 2007.
By region, stamp duty was highest as a percentage of full-time earnings in 2007 in the South East (23%) and London (21%) and lowest in Scotland (5%). Five years ago, the average home buyer in all regions paid the equivalent of less than 10% of average annual full-time earnings for residential stamp duty.
The average stamp duty bill was worth more than 20% of average full-time earnings in 91% of London LAs (29 out of 32) and 61% of LAs in the South East (41 out of 67) in 2007. In 2002, only 25% of London LAs (8) and 12% of LAs (8) in the South East had an average stamp duty bill of more than 20% of full-time earnings.
Meanwhile, the average homebuyer in South Buckinghamshire paid stamp duty of £21,241 in 2007, equal to 49% of average annual full-time earnings in the area; the highest proportion in the country. The next highest percentages were in Kensington & Chelsea (47%), Chiltern (44%) and Camden (40%). The 20 areas with the highest stamp duty bills as a percentage of earnings are all in the south of England.
Whilst these numbers should be treated with caution, given that figures relating to averages can be less meaningful where there is a wide distribution of earnings as is the case in these areas, the stark reality is that stamp duty thresholds are grossly understated.
By the Halifax's reckoning if the higher stamp duty thresholds were increased in line with house price inflation since July 1997 - when the £250,000 and £500,000 stamp duty thresholds were introduced - they would now stand at £720,000 and £1,440,000.
27 February 2008 © Moneyextra.com
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