Stamp duty ‘a threat to the economy’

STAMP duty is putting the economy at risk because the owners of more expensive properties now pay so much tax, the Office for Budget Responsibility has said.

Ministers, peers and think tanks are urging Philip Hammond, the Chancellor, to cut the duty – dubbed a “tax on moving” – in his Autumn Budget, amid fears that it is stifling the housing market. The OBR, the official economic watchdog, said that revenues from stamp duty are now “highly concentrated” on the sale of more expensive homes.

In 2015-16 just 9,250 house sales in Westminster and Kensington & Chelsea accounted for 14 per cent of all stamp duty collected by the Government.

In 2014 George Osborne, the former chancellor, overhauled stamp duty and increased the amount of tax paid by those buying properties worth more than £1 million. There are concerns that the reforms have slowed the entire market because it is more difficult for owners of expensive homes to sell up.

Under the 2014 reforms a longstanding “slab” system – with buyers charged a percentage of the full purchase price as soon as it hits certain thresholds – was scrapped and replaced by a “slice” approach, with different percentage rates applied to each portion of the price, up to 12 per cent on transactions above £1.5million.

In a report assessing the economic risks facing Britain, the OBR said: “There are risks from the concentration of tax receipts among a small number of taxpayers. The move to a slice system with more steeply rising marginal rates has increased concentration, with the proportion of receipts from properties over £1 million doubling since 2007-08.”

In a separate report the OBR forecast that revenues from stamp duty will rise from £11.6billion in 2016-17 to £17billion by 2021-22.

The Daily Telegraph has campaigned for the tax to be reviewed. A lack of housing for younger Britons is one of the most serious political problems facing the Conservatives and many senior Tory figures believe Theresa May, the Prime Minister, must address the issue if she is to match Labour’s popularity among voters aged under 40.

A survey by Yougov on behalf of retirement house-builder Mccarthy & Stone found that 1.2million pensioners would be prepared to downsize if they did not have to pay stamp duty.

A Cabinet minister earlier this week said that stamp duty should be reformed because it is exacerbating the housing crisis. Experts suggested that scrapping stamp duty for pensioners would also lead to a boost in Treasury receipts due to the increased activity in the housing market.