The amount of money paid on residential property in stamp duty has risen to its highest ever rate.
In the year 2014-15, £7.5bn was paid in stamp duty in the UK, compared to £6.45bn in 2013-14. The rate beat the previous high of £6.68bn seven years ago in 2007-08.
However, it is expected that the figure has now peaked, and that the figure will fall from next year, mainly due to changes in the way the tax is calculated in England and Wales.
Until December last year, buyers in England and Wales were faced with what many perceived as unfair stamp duty charges, which often did not truly reflect the cost of their homes.
For example, someone buying a home for £250,000 would have paid £2,500 – or 1% – in stamp duty. But if the price of the house was just £1 more, they would have been forced to pay an extra £5,000, as stamp duty on houses over £250,000 was calculated at 3% of the purchase price.
However, following the Stamp Duty Land Tax reforms, the system is now more in line with that in place in Scotland, and only 2% of buyers – those buying the most expensive properties – pay more in the tax now than they would have before December 2014.
Buyers now pay no stamp duty at all on the first £125,000 and 2% on the value between £125,001 and £250,000. This rises to 5% on the section of the cost between £250,001 and £925,000, 10% on the value between £925,001 and £1.5m and 12% on the value above £1.5m.
Of the £7.5bn paid in stamp duty last year, £7.1bn was on purchases in England.
However, the higher stamp duty now commanded by expensive London properties appears to have had an effect on the market in the capital.
The year-on-year stamp duty increase in Westminster was just 13.3% compared to 19.4% last year, while in Kensington and Chelsea it was just 1.6%, compared to a 27.6% rise between 2012/13 and 2013/14.
Tom Bill, head of London residential research at Knight Frank, said: “Although the new stamp duty rules were only applicable for a quarter of the period in question, combined with a slowdown in activity that began after last summer as the general election campaign got under way and the prospect of a ‘mansion tax’ began to loom larger, there is a discernible impact on the prime central London market.
“The stamp duty figures show the contribution to overall UK revenue of the top two local authorities in the country, Westminster and Kensington & Chelsea, declined last year. Indeed, the contribution of the top five London boroughs has fallen to 18.9% from 21.1% over the last two years.
“To some extent, this may be explained by a pick-up in sales in the rest of the country as stamp duty has fallen for properties worth less than £1.1m, which may have prompted more transactions.”
“However, the rate of growth for stamp duty revenue in Westminster and Kensington & Chelsea has slowed and remains below the UK average. The other top-contributing London boroughs also saw sharp falls in growth in 2014/15 that were below the UK average.”
Outside London, buyers in the South-East of England paid the most – forking out £1.63bn, while in the North East they paid just £70m.
Buyers in Wales paid £105m, while those in Scotland and Northern Ireland paid £270m and £25m respectively.
Between December last year and June this, buyers saved £701m, according to conveyancing firm myhomemove.