More than half of homeowners buying new property in Northern Ireland will now be hit by stamp duty says Zoopla

Listings website Zoopla has estimated that the number of existing homeowners in Northern Ireland who will have to pay the tax whenever they buy a new home will jump from 10% to well over half in April.

The changes were announced by the Labour government last October.

Stamp duty (formally known as stamp duty land tax or SDLT) is payable in England and Northern Ireland whenever someone buys a house; Scotland and Wales operate a different form of tax.

There are some exemptions – chiefly for first-time buyers, who are eligible for relief which means that in practice most do not have to pay any SDLT.

Therefore this article is going to focus on the tax payable by existing homeowners who are moving house.

At present, existing homeowners don't pay any tax on the first £250,000-worth of the new house they are buying.

They must then pay a 5% tax on the value of the new property between £250,001 to £925,000.

In other words, if an existing homeowner buys a house right now that is worth £200,000, they pay nothing.

But if they buy a house worth £400,000 they must pay 5% of £150,000 – or £7,500.

What is happening from April 1 is that the government is going to lower the threshold at which they must pay the tax.

From that point onwards, the government is requiring homeowners to pay a 2% tax on the value of the new property between £125,000 and £250,000.

This is still followed by the same rate of 5% on the value between £250,001 and £925,000 as before.

So under the new regime, the amount owed in stamp duty for that £400,000 house would be £10,000 (calculated as 2% of £125,000, plus 5% of £150,000).

According to Zoopla, dropping the threshold from £250,000 to £125,000 will mean the proportion of house purchases by existing homeowners which stamp duty is chargeable on will increase from 10% to 59% in Northern Ireland.

Meanwhile the number of people who are buying their home for the first time who will be required to pay the tax will jump from 1% at present to 5% as a result of the changes.

Richard Donnell, executive director at Zoopla said: “Stamp duty has become a big source of tax revenue, approaching £10bn a year for the Government. The reduction in tax reliefs from April will see more home buyers paying stamp duty.

“It’s positive that most first-time buyers will still pay no stamp duty from April, but these changes hit those buying over £300,000 in southern England the most, where buying costs are already high. This will reduce buying power and market activity at a local level.

“Stamp duty is a big tax on home movers in southern England, where affordability problems are already a major challenge.

"The case for reforming stamp duty remains, but the question is where to replace the multi-billion in annual tax revenues.”