£1bn stamp duty blow

Osborne reform sees families staying put... and costing Treasury huge sums

STAMP duty tax receipts have dropped sharply as families stay put to avoid paying higher rates, critics claim. The Exchequer earned £12.9billion from stamp duty payments from people moving house in the last tax year – down from £13.6billion in the previous 12 months.

Stamp duty is paid by house buyers on properties over £125,000. There are five tax bands based on a home’s price.

The rate starts at two per cent of a property’s value between £125,000 and £250,000 and peaks at 12 per cent for homes above £1.5million.

Critics claim that income from stamp duty is dropping because of the punishing increases introduced by former Chancellor George Osborne

Mr Osborne raised stamp duty on the most expensive homes in December 2014, pushing up the costs for anyone buying a property worth more than £937,500.

Homes worth £937,500 had previously paid just four per cent stamp duty when sold.

But a complicated new system was introduced where someone buying a house of this value would now have to pay a 10 per cent rate on part of the house’s value. Under the new system, anyone buying a house worth less than £937,500 would be better off than before, but anyone buying a house worth more would be worse off.

Landlords were also targeted by Mr Osborne, with a three percentage point increase in the tax on someone buying a second home from 2016 onwards.

It is feared the costs are now so high that many prospective buyers are put off selling. Matt Kilcoyne, of the Adam Smith Institute think-tank, said: ‘The

‘Like taking part of our homes’

Government’s raising of stamp duty is akin to taking part of our homes.

‘Stamp duty is a disastrous tax. It prevents people from moving, leaving people in houses that are too big and costly to maintain and creating friction that increases house prices.

‘It prevents young people from moving to places where they could get a better job or start a business.’

Mr Osborne’s stamp duty rise is thought to have hit demand at the top end of the market.

This ultimately filters down to first-time buyers, because there are fewer properties on the market for them to take.

The tax increases are also thought to be partly to blame for a slowdown in the property market which has seen house prices in the South East drop for the first time since 2012.

Uncertainty due to political turmoil over Brexit is also thought to have had an impact on numbers moving house.

However, overall the Treasury raked in £739.4billion from tax receipts and other income in the year to April 1 – pushing state borrowing to a 17-year low.

Corporation tax was cut from 28 per cent when the Tories came to power in 2010, down to 19 per cent today.

The reduction is thought to have encouraged businesses to move to Britain and helped persuade entrepreneurs to start up companies.

Income from corporation tax hit £60.1billion in the last financial year, up from £40.1billion in the last year under Labour, according to the Office for National Statistics.

Higher business tax payments have helped reduce borrowing significantly. The Government spent £ 24.7billion more than it earned in 2018-19, down from £41.8billion in the previous year and the smallest amount since 2001-02.

IT is an elementary law of economics that when taxes are set too high, revenues fall.

The reason is simple. If you overtax enterprise and hard work, people become less enterprising and less hard-working. And those who can, take their enterprise and labour (and capital) elsewhere. Take George Osborne’s swingeing increases in stamp duty. New figures show the malign effects have been housing market stagnation and a reduction in the tax take of a massive £700million a year.

Conversely, cutting corporation tax from 28 to 19 per cent has seen revenue soar by £20billion and fuelled an unprecedented employment boom. Labour has never learnt this lesson. Shadow Chancellor John McDonnell is itching to raise both business and personal taxes to crippling levels – even though he would bring in less money.

So for reasons of bone-headed ideology we would all be massively worse off – the many and the few!