Figures from HMRC revealed that homebuyers have paid £8.6bn in stamp duty so far this year.
This was lower than the £12.07bn intake over the same period last year.
From April, the start of the tax year, overall receipts for stamp tax amounted to £7.7bn which was £3bn lower than the previous year.
HMRC said the drop in intake was driven by lower transaction numbers and the lower stamp duty threshold introduced in September last year.
Until March 2025, the stamp duty threshold is £250,000.
Reform to help downsizers
Coventry Building Society has called to a reform of stamp duty following the news that homebuyers paid more than £1bn in the tax so far this year.
The mutual said the current system gave first-time buyers “one time support” but did not help people looking to downsize. It said this could instead deter downsizers meaning the number of homes available for larger families would be impacted.
The current threshold of £250,000 means the tax on an average priced home in England is £2,980. However, when this drops back down to £125,000 from March 2025, Coventry Building Society said this would rise to £5,480.
Analysis conducted by the mutual using Census data revealed there were around 24.5 million spare bedrooms in homes across England, suggesting that people were living in properties that did not fit their needs.
Jonathan Stinton, head of intermediary relationships at Coventry Building Society, said: “There are enough spare bedrooms in England to house every person in London nearly three times over. With at least 24 million spare bedrooms across the country, there needs to be more of an incentive to downsize.
“Stamp duty is an unavoidable upfront cost, which could amount to tens of thousands and thousands of pounds – it’s no surprise potential downsizers could be deterred by the thought of paying a hefty bill, along with the other associated costs, to ultimately end up with something less valuable. There could be many people who feel it just doesn’t make financial sense to downsize.”
Stinton added: “It’s only going to get worse in 17 months’ time, when the stamp duty thresholds change again and the bill on an average priced home jumps by £2,500. It’s clear that a long-term solution needs to be established, one which aims to support buyers who need to move both up and down the ladder.”
IHT – a political conundrum
For the period covering April to September, inheritance tax (IHT) intake totalled £3.9bn, which was £400m higher than the same period last year.
Laura Hayward, tax partner at Evelyn Partners, said the Treasury would be “buoyed by the news that IHT receipts have shown yet another year-on-year increase”.
She added: “IHT receipts really are the gift that keeps on giving at a time when the Treasury needs to do all it can to bolster its coffers.”
Hayward continued: “The prospect of abolishing IHT has been bounced around as an idea for a Conservative election manifesto pledge and while the Chancellor has been playing down the prospect of imminent tax cuts, it’s not impossible that he could pull a small IHT rabbit out of the hat at the autumn statement, with something like a raising of the nil-rate band.
“An immediate concern for many families is that more and more are being dragged into paying IHT by stealth as a result of number of number of factors, including allowances being frozen until at least 2028 and inflationary growth of asset values.”
The nil rate band will be frozen at £325,000 until at least April 2028.
Rosie Hooper, chartered financial planner at Quilter, said: “This shines a light on why both political parties are currently making IHT a battleground policy in the run up to an election next year.
“This increasing revenue causes a conundrum for the government as IHT is an emotive tax that can split voters.”
She said the extension of the threshold freeze until April 2028 was likely to “rake in record amounts by stealth in the meantime”.
Hooper added: “The problem lies in the fact that higher property prices have upped the number of households falling in the scope of IHT, and while growth has slowed in the housing market, we are still yet to see a significant drop in prices. The value of the average UK home now sits at almost £291,000 in August 2023 with that average much higher in the south of England.
“Frozen IHT thresholds form part of a broader fiscal drag strategy employed by this government, which has also frozen income tax thresholds, capital gains tax allowances, and dividend allowances in order to boost revenues. There is no doubt that IHT needs thoughtful reform but either political party needs to ensure that they do not create unintended consequences.”
