People buying a home in England and Northern Ireland paid a total of £2.06bn in stamp duty in the 3 months to the end of June, up 90% on the same period of 2020.
The jump in payments came despite the impact of the stamp duty holiday, which ended on 30 June 2021, during which the tax was not charged on homes costing up to £500,000.
Only 37% of buyers in the 3 months to the end of June 2021 were liable for stamp duty, according to HM Revenue & Customs.
By contrast, 64% of buyers were liable for the tax in the same period of 2020 (before the holiday was introduced), resulting in a payment of £1.9bn in tax duty - almost half what was paid by a smaller percentage of buyers in 2021.
Why is this happening?
The steep increase in the amount of stamp duty being paid has been driven by soaring property transactions, as people took advantage of the threshold at which stamp duty kicked in being raised to £500,000.
There was a 175% jump in the number of homes changing hands during the 3 months to the end of June, as people rushed to complete their purchase before the full stamp duty holiday ended, according to HMRC.
It also led to a significant rise in the number of people buying homes costing more than £500,000, as they were still able to make significant stamp duty savings, despite being charged the tax at a rate of 5% on the portion of their purchase costing between £500,001 and £925,000,10% on the portion between £925,001 and £1.5m, and 12% on the portion above £1.5m.
A total of 59,600 properties were bought for more than £500,000 in the 3 months to June 2021, compared with just 13,000 a year earlier, with these higher rates of stamp duty making a significant contribution to the total amount of the tax paid.
A further £485m was paid by people purchasing a second home or buy-to-let property, as the 3% surcharge on these homes was not covered by the stamp duty holiday.
At the same time, a new 2% stamp duty surcharge was introduced for overseas buyers purchasing a property in England or Northern Ireland on 1 April, which raised £19m.
What could this mean for you?
While the full stamp duty holiday on homes up to £500,000 has ended, you still have time to take advantage of the tapered stamp duty holiday.
If you can complete the purchase of your property by 30 September 2021, you will not have to pay stamp duty on the first £250,000 of the purchase.
Once the conveyancing process starts, be sure to respond to any questions or requests for documents from your solicitor as soon as possible to give yourself the best chance of completing on time.
And remember, if you are a first-time buyer, you do not have to pay stamp duty on the first £300,000 of your purchase, as long as your home costs less than £500,000.
What’s the background?
Not only did the stamp duty holiday lead to a sharp increase in the number of homes being sold, but the mismatch between supply and demand also led to strong house price growth.
As a result, an estimated 1.8m properties have been pushed into a higher stamp duty band, according to our research.
An estimated 940,000 properties have moved into the 5% stamp duty band, while 130,000 have moved into the 10% band.
The change will cost buyers purchasing a home in the 5% band an additional £725 on average once the tapered stamp duty holiday ends, while those purchasing a home in the 10% band can expect to pay £6,100 more.