Pres­sure for stamp duty re­form to re­vive hous­ing mar­ket

It brings the Trea­sury huge rev­enues but does a re­cent fall in the tax take show the sys­tem is back­fir­ing?

The Sunday Telegraph - Money & Business - - Front page - Sam Barker re­ports

Calls for stamp duty re­form have in­ten­si­fied as cam­paign­ers claim that a re­cent drop in trans­ac­tions is due to would-be buy­ers try­ing to avoid the pun­ish­ing tax. The Gov­ern­ment’s re­cently pub­lished fig­ures for April to June show that the over­all num­ber of sales li­able for the prop­erty tax fell by 11pc year on year. Stamp duty re­ceipts in Jan­uary to March dropped by an an­nual 9pc.

Mark Bog­ard, of the Fam­ily Build­ing So­ci­ety, said: “Th­ese fig­ures show that we need an ur­gent re-think on hous­ing pol­icy. The mar­ket is gummed up and stamp duty is a ma­jor rea­son. A fully func­tion­ing hous­ing mar­ket is es­sen­tial to the coun­try’s eco­nomic well-be­ing.”

The drop in the sec­ond quarter was partly due to the Gov­ern­ment easing the tax bur­den on first-time buy­ers. Wales has also been ex­cluded from the fig­ures be­cause its stamp duty gov­er­nance is now de­volved. How­ever, cam­paign­ers say more needs to be done to help all home buy­ers.

Since Novem­ber, first-time buy­ers have been ex­empt from the tax on the first £300,000 of any prop­erty worth up to £500,000. This group saved a to­tal of £125m in stamp duty in April to June, 18pc more than the pre­vi­ous quarter. It has saved £284m in tax, re­lat­ing to 121,500 homes, since the ex­emp­tion was brought in.

Mel Stride, fi­nan­cial sec­re­tary to the Trea­sury, said: “Once again we can see that our cut to stamp duty for first-time buy­ers is help­ing to make the dream of home ownership a re­al­ity for a new gen­er­a­tion – ex­actly as we in­tended.”

But Paula Hig­gins of the Home­own­ers Al­liance, a lobby group, said stamp duty needed re­form beyond help­ing this type of pur­chaser.

She said: “By fo­cus­ing solely on first-time buy­ers we’re ig­nor­ing the needs of large swathes of po­ten­tial buy­ers. The mas­sive cost of stamp duty, com­bined with the other costs in­volved in buy­ing and sell­ing a home, is a huge bar­rier to mov­ing.”

He­len Morrissey of Royal Lon­don, the in­surer, said the fig­ures might not be as rosy as they ap­peared for first-time buy­ers as sell­ers might have in­creased prices in the knowl­edge that buy­ers would save on tax. She said the ex­emp­tion would be only a short-term so­lu­tion to fix­ing the hous­ing mar­ket if it was not ap­plied to home movers.

She said: “First-time buy­ers can­not move up the hous­ing lad­der if those ahead of them can’t af­ford to move, so the mar­ket re­mains clogged. If stamp duty were lower, more peo­ple look­ing to down­size in re­tire­ment could free up some of the value in their home to top up their pen­sion. It would also free up fam­ily homes for those need­ing more space.”

Re­search from the Home­own­ers Al­liance found that 24pc of sec­ond step­pers saw stamp duty as a bar­rier to mov­ing.

Mrs Hig­gins said: “We would like to see a fair hous­ing mar­ket where peo­ple can move when they need to. At present, stamp duty re­mains a huge fi­nan­cial bar­rier to that.”

Mr Bog­ard agreed that stamp duty had to be re­struc­tured to en­cour­age peo­ple to move house. He said the cur­rent tax sys­tem dis­cour­aged older home­own­ers from down­siz­ing and mid­dle-aged own­ers from mov­ing.

Stamp duty is worked out ac­cord­ing to price bands. Noth­ing is payable on prop­er­ties worth up to £125,000. Homes worth £125,000 to £250,000 in­cur a 2pc tax bill, ris­ing to 5pc from £250,001 to £925,000, 10pc from £925,001 to £1.5m and 12pc on prop­er­ties over £1.5m.

Peo­ple who buy a sec­ond home pay an ex­tra 3 per­cent­age points on top of this. Gov­ern­ment fig­ures show that 46pc of all stamp duty is paid on homes sub­ject to the sur­charge.

A re­cent re­port in the Sun sug­gested that the Trea­sury was con­sid­er­ing in­creas­ing this ad­di­tional home sur­charge in the au­tumn Bud­get. A Trea­sury spokesman would nei­ther con­firm nor deny this. The Na­tional Land­lords As­so­ci­a­tion (NLA) and Res­i­den­tial Land­lords As­so­ci­a­tion (RLA) said they had not been briefed on it.

David Smith of the RLA said the sur­charge was al­ready “a tax on new hous­ing” in cases where land­lords ren­o­vated derelict prop­er­ties and in­creased hous­ing sup­ply. He called for it to be scrapped in th­ese cases.

He said: “It would be crazy and to­tally ir­re­spon­si­ble to ex­tend a mea­sure that puts land­lords off from in­vest­ing in new hous­ing. Any in­crease will only lead to a fur­ther re­duc­tion in sup­ply, adding to the hous­ing short­age and mak­ing life more dif­fi­cult for tenants.”

Chris Nor­ris of the NLA said his or­gan­i­sa­tion also op­posed any in­crease.

Gen­er­ally, stamp duty has been hugely prof­itable for the Gov­ern­ment. In the 2017-18 fi­nan­cial year the Trea­sury made £9.3bn from the tax, down from the pre­vi­ous year’s record £11.7bn.

‘The mar­ket is gummed up and stamp duty is a ma­jor rea­son’

The Trea­sury made £9.3bn from stamp duty in the 2017-18 fi­nan­cial year and a record £11.7bn in the pre­vi­ous year

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