Stamp duty ‘thwarts 45,000 house deals’

The Daily Telegraph - - Front page - By Katie Mor­ley CON­SUMER AF­FAIRS EDI­TOR

Stamp duty is pre­vent­ing 45,000 house pur­chases a year, ac­cord­ing to a study. The num­ber of pur­chases es­ti­mated to have been stalled by the tax has dou­bled over five years, the Cen­tre for Eco­nom­ics and Busi­ness Re­search found, as Phillip Ham­mond comes un­der pres­sure to cut the tax.

STAMP duty is pre­vent­ing 45,000 house pur­chases a year, a study has found, as Philip Ham­mond comes un­der grow­ing pres­sure to cut the tax to help first-time buy­ers get on the lad­der.

The num­ber of home pur­chases es­ti­mated to have been pre­vented by the tax has dou­bled over five years, with first-time buy­ers, home movers and down­siz­ers all af­fected, ac­cord­ing to a new re­port by the Cen­tre for Eco­nom­ics and Busi­ness Re­search. The Chan­cel­lor is ex­pected to an­nounce a tem­po­rary stamp duty hol­i­day for first­time buy­ers in his Bud­get next week, to help dis­si­pate re­sent­ment among young peo­ple who are stuck rent­ing.

The move would be a vic­tory for The Daily Tele­graph, which has cam­paigned for cuts to stamp duty to help fam­i­lies and boost the econ­omy.

If brought for­ward, it is un­likely that the pol­icy would pro­vide a full tax break to homes of any value be­ing bought by first-time buy­ers. Last night ex­perts sug­gested the value of tax-free prop­erty pur­chases could be capped at £250,000, or £450,000 in London.

Those buy­ing more prop­er­ties with val­ues above the thresh­old may still be able to ben­e­fit, but would be likely to have to pay stamp duty on pur­chase val­ues above the cap. Since 2012 an ad­di­tional 146,000 prop­erty trans­ac­tions would have taken place if stamp duty had been re­moved, the re­port said.

Paula Hig­gins, chief ex­ec­u­tive of the Home­own­ers Al­liance, said: “A break for first time buy­ers would be a clean move.”

In a crowded field, stamp duty can lay a strong claim to be­ing the worst tax the gov­ern­ment levies. Once a charge im­posed on doc­u­ments re­quir­ing a phys­i­cal stamp, it has mor­phed into a mon­ster. It adds thou­sands to the up­front cost of mov­ing house and con­trib­utes sig­nif­i­cantly to Bri­tain’s poor rates of pro­duc­tiv­ity growth by dis­in­cen­tivis­ing down­siz­ing or re­lo­cat­ing to dif­fer­ent parts of the coun­try for work.

Suc­ces­sive chan­cel­lors have viewed tax­ing prop­erty trans­ac­tions as an easy means of rais­ing rev­enue, par­tic­u­larly from those per­ceived to be wealthy. The con­se­quences have been ter­ri­ble. As we re­port today, stamp duty pre­vents 45,000 house pur­chases from hap­pen­ing each year, and has stopped a damn­ing 146,000 since 2012. By gum­ming up the prop­erty mar­ket, earn­ers at all lev­els of in­come are left worse off.

The Chan­cel­lor, Philip Ham­mond, is ex­pected to at­tempt to ame­lio­rate the sit­u­a­tion in the Bud­get next week by an­nounc­ing a tem­po­rary stamp duty hol­i­day for first-time buy­ers. This is wel­come, as far as it goes, but also risks com­pli­cat­ing the sys­tem fur­ther. It will mean, for ex­am­ple, that first-time buy­ers will be able to of­fer more for prop­er­ties than those who are sim­ply mov­ing home. Is that nec­es­sar­ily fair? Equally, if it is only tem­po­rary, those who have bought dur­ing the hol­i­day may face a cap­i­tal loss when it is with­drawn.

Taxes are at their best when they are sim­ple, low, and don’t dis­tort peo­ple’s choices. Stamp duty meets none of those cri­te­ria. It should be cut sig­nif­i­cantly for every­one, or abol­ished.

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