Over 1.2m homes have moved above the basic stamp duty threshold which will bring the Exchequer at least an extra £3bn a year

According to Zoopla’s latest house price index, 1.2m properties in the UK have moved above the initial £125,000 stamp duty threshold as house prices have risen around £29,000, or 13%, since March 2020 with an 8.3% rise in the last year alone.

As buyers pay 2% of stamp duty between £125,000 to £250,000, the Treasury looks set to see a minimum increase of at least £3bn if those 1.2m houses are sold at the entry rate of £125,001.

Since the average house price in the UK sits at a record level of £292,000, according to the Office for National Statistics (ONS) in January 2022, the Treasury will almost certainly see that extra £3bn in its coffers.

The latest HMRC stamp duty data revealed that in the first quarter of 2022, residential property transactions were 13% lower than they were in Q4 2021, and of the 244,200 residential homes bought, only 43,700 received first time buyer relief, while 27,300 were below the tax threshold altogether.

According to HMRC, 70% of residential transactions were liable for stamp duty land tax, compared to just 36% in Q1 2021 due to covid exemptions, with the average stamp duty bill for residential property in Q1 being £15,000, according to analysis from Coventry Building Society.

The data also showed that the 2% surcharge on the purchase of residential properties by non-residents up to the end of Q1 2022 raked in £111m for government coffers on just 10,400 transactions.

Last week’s tax receipts data from HMRC showed that the Treasury gained more than £14bn in stamp duty, including non-residential property in 2021-22 and comes despite the stamp duty holiday, which ended in September. Of that, £9.9bn of stamp duty receipts last year came from residential properties.

The overall receipts for stamp duty land tax, and annual tax on enveloped dwellings, for 2021-22 sat at £18.6bn, which is £6.1bn higher that the same period last year.

The Office for Budget Responsibility (OBR) predicts that stamp land tax duty alone will net the Treasury £17.1bn in the year to March 2023, a figure that is set to surge even higher to £20.8bn by 2027.

Tom Bill, head of UK residential research, Knight Frank, said: ‘Stamp duty has always been a pretty imperfect tax and can have a distorting effect on the market.

‘Reforming it could be problematic for the government, which may not have much bandwidth to do it before the next election.

‘With the social care crisis, however, you could see the rationale for offering stamp duty relief to people who want to downsize rather than wholesale changes, because having to pay that large bill can deter people from moving.’

There has been a lot of attention on the levels of stamp duty collected by the Treasury over the last two years due to rapidly rising prices however, Karen Noye, a mortgage expert at wealth management company Quilter said that rising house prices could possibly be a ‘thing of the past’.

Noye said: ‘Across the whole market, there has been a fall in transactions in the last three quarters and total SDLT receipts in Q1 2022 were 19% lower than in Q4 2021.

‘The heat is finally coming out of the UK property market, and this may have an impact on house prices. With interest rates likely to go up and lots of other factors squeezing people’s finances a gradual drop in house prices is highly likely’.