Stamp duty ‘thwarts 45,000 house deals’
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.