The true cost of stamp duty could be 67% higher than the tax bill itself, potentially leaving homebuyers spending thousands of pounds more than they realise.

According to new analysis from Coventry Building Society, if homebuyers are paying the taxman rather than contributing towards their deposit, they will need to borrow extra and end up paying thousands more in interest over the life of their mortgage.

Stamp Duty Land Tax must be paid, at various percentages, within 14 days of anyone buying a home.

Calculations from Coventry Building Society revealed that someone borrowing £5,000 more to cover the stamp duty on their £350,000 home will actually pay £8,346 over the term of a 25-year mortgage – an increase of 66.9%. This is assuming a mortgage rate of 4.51%.

Landlords or anyone buying a second property, which includes those buying a new home while still named on the family home following a split, also face higher stamp duty costs to begin with as they must pay a 3% surcharge.

Head of mortgage relations at Coventry Building Society, Jonathan Stinton, commented: “After they get their keys, people have a two-week grace period to cough up thousands of pounds in stamp duty. If they don’t have that lying around the chances are they’ll need to eat into their deposit to cover the bill, meaning the amount they pay in real terms shoots up by thousands.

“Stamp Duty is already considered a burden to homebuyers, but this shows it’s a more damaging liability than people perhaps realise. It adds to the long list of reasons why stamp duty should be top of the Chancellor’s priorities this Budget.

“Not only does it put a lag on the market, it disincentivises downsizers, stifles the private rental sector by imposing a 3% surcharge, and it’s costing many homebuyers thousands more than they realise.”

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