Conveyancing: Where Does All The Money Go?
I read an interesting article in the Telegraph the other day about Stamp Duty Land Tax.
Yep, tax and interesting in the same sentence.
It was talking about how the number of people affected by stamp duty (SD) has more than doubled in the past decade.
This is all down to rising house prices.
As house prices have risen, the stamp duty thresholds have remained the same. This means that more houses are subject to paying SD, deterring people from buying homes, and not allowing young people to get onto the property ladder.
Conservative MP’s and financial experts have warned that the middle class was being burdened with taxes that were originally designed to affect only the richest people.
How much is Stamp Duty?
A whopping 90% of the total legal costs involved in purchasing a property goes to the government in SD, with a further ‘2 and a bit’ percent to another government department – the Land Registry.
As an example on a house costing £350,000; out of a total legal cost of approximately £11,500, just under £10,600 goes on Stamp Duty Land Tax.
Only 5-6% of this total cost goes to your conveyancing solicitor.
It is not payable on house up to and including £125,000, but kicks in at a pound over that number.
The amounts payable above that threshold are:
- 1% up to £250,000
- 3% between £250,001 and £500,000
- 4% between £500,001 and £1,000,000
- 5% between £1,000,001 and £2,000,000
- 7% over £2,000,001.
Homes worth more than £250,000 made up 25% of all property sales last year – in 2003 this figure was 10%.
The South East of England has the largest issue with SD, 42% of total SD paid in 2013 was from the London area, despite sales only accounting for 13% of all sales.
Why is Stamp Duty Land Tax so expensive?
The tax brackets for Stamp duty have not been altered to bring them in line with current house prices. As a result middle class purchasers and first time buyers trying to get on the property ladder are being affected by taxes meant for the rich.
Because of the unfairness to the middle class and first time buyers, MP’s have suggested that George Osborne should make a commitment to altering the Stamp Duty thresholds, much like he did with the Pension reforms. There will be a back bench debate on this matter in September.
With any luck, the myth that conveyancing fees ‘cost thousands and thousands of pounds’ could be put to rest soon – with the thresholds changed and more people able to buy property or get a foot on the property ladder.
More information to follow after the debate!
To read the full article on the Telegraph website, click here.
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