Homeowners could be made to pay a new tax on the sale of houses valued at more than £500,000 as part of a restructuring of stamp duty and council tax by the Treasury.
Chancellor Rachel Reeves has asked Treasury officials to analyse the potential for a national property tax, deemed the “mansion tax”, which would replace stamp duty on owner-occupied homes of high value.
If implemented, the new tax would be paid by the owners of homes when they sell their property valued at more than half a million. However, experts say that this may slow down the housing market.
Here, The i Paper takes a look at how stamp duty tax in the UK compares with other countries.
In the UK, Stamp Duty Land Tax is added on the purchase of properties, including both residential and commercial properties. The tax is calculated on a percentage of the property’s value, which is then compared to specific thresholds.
Stamp duty raised £11.6bn for the government in the 2023-2024 financial year.
In comparison to a transactional tax payable upon property purchase, property taxes in several other countries are recurring, paid-annually or semi-annually while living at the property. These countries include the US and Canada.
In the US, taxes are imposed at a local level, and support local services such as schools and roads. This differs to the UK where levies contribute to the government’s revenue. On average, American homeowners are expected to pay around 0.8 per cent to 1.1 per cent of their property’s determined value each year.
Stamp Duty rates
Properties valued at £125,000 or less in the UK are exempt from stamp duty, which was halved on 1 April. Properties between £125,000 and £250,000 are taxed two per cent, which increases to five per cent with the next £675,000, and to 10 per cent for homes between £925,001 to £1.5m. The highest threshold of properties valued at over £1.5m are taxed at 12 per cent.
If you already own a property valued at £40,000 or more, you must pay an additional rate to that on your first property.
The UK stamp duty rates sit on the higher end amongst countries that implement stamp duty tax, or the equivalent. Alternatively, many other countries choose to add a greater tax on those purchasing second homes or on non-resident buyers. France enforces a levy of 5.8 per cent for all properties that are more than five years old, while the Netherlands implements a standard rate of two per cent.
Exemptions for first-time buyers
First-time home buyers benefit from different thresholds in value of houses in a bid to encourage purchases of UK homes.
Now, stamp duty is paid by first-time buyers buying homes valued at more than £300,000. A first-time buyer purchasing a property at £500,000 will pay £10,000 in stamp duty tax, therefore five per cent.
A similar model of assistance to first time buyers is seen in Italy, while Portugal implemented levy exemptions for first-time buyers who were up to the age of 35 years-old last year. Certain regions of Australia offer an equivalent of stamp duty relief, while France implements a 0.7 per cent charge plus VAT on new builds.
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