How fabulous it will be if the stamp duty holiday is extended in next week’s Budget – but how much better still if Rishi Sunak were to scrap this rotten tax for good.
The Chancellor would not only win homebuyers’ undying gratitude, but would be giving the economy a much-needed boost. Stamp duty clogs the housing market’s arteries and contributes to a host of other economic ills.
It has, with justification, been branded the worst tax in Britain. Abolition is long overdue.
The property market mercifully has held up well in the pandemic, but if and when stamp duty is reinstated, it will risk grinding that market to a juddering halt: the last thing the country needs as it emerges hesitantly from lockdown.
If Rishi Sunak were to do away with it altogether, it would bring benefits to the economy that would reverberate well beyond propping up house prices.
How fabulous it will be if the stamp duty holiday is extended in next week’s Budget – but how much better still if Rishi Sunak were to scrap this rotten tax for good. Pictured: Rishi Sunak holds the budget box in Downing Street in March 2020
Stamp duty is a terrible tax, philosophically and economically. One function of taxation is supposed to be rewarding socially desirable behaviour and punishing the reverse. Yet stamp duty flies in the face of this.
It is in fact a deeply cynical tax because it exploits people’s natural human desire for a secure home, and preys on the fact that property ownership is hard-wired into British culture.
It inflicts pain at all points on the property ladder. For first-time buyers, it is a huge imposition on top of a deposit. For those at the next stage, seeking a larger home to start a family, it is a formidable barrier. And it is a potent deterrent to ‘last-time buyers’: retired folk who would like to downsize.
A London School of Economics study found reluctance or inability to pay the levy left older people marooned and often lonely in unsuitable homes.
Stamp duty is a very old tax dating back as far as 1694, but for most of its long history, it has troubled relatively few Britons.
Stamp duty is a terrible tax, philosophically and economically. One function of taxation is supposed to be rewarding socially desirable behaviour and punishing the reverse. Yet stamp duty flies in the face of this (stock photo)
In the 1960s, for example, it was payable at a rate of 1 per cent on home purchases of more than £5,500 – but back then, the average price was significantly lower than that and hardly anyone had to pay.
Only recently has it become so onerous. Ironically, a lot of this has happened under Conservative administrations which ought to have known better.
The rot really set in with George Osborne, who in 2014 introduced a system of ratcheting rates, the highest of which is an eye-watering 12 per cent on the portion of a property price above £1.5million. That sounds a lot to pay for a house, but would drag in a fair few relatively ordinary homes in London and the South East.
Stamp duty is a prime example of the ‘Laffer effect’, where increases in rates do not necessarily result in bigger revenues. Before the pandemic, receipts from the duty actually fell, as people simply opted not to move.
For evidence, look no further than all the basement and loft conversions to be seen in middle-class enclaves: they are testament to the fact people would rather spend their money on home improvements than give it to the taxman.
The ill effects don’t stop at the housing market. Stamp duty has a chilling effect on mobility, geographic and social, because it makes it harder for people to move from regions where property prices are low to more prosperous places where home values are higher.
Stamp duty has a chilling effect on mobility, geographic and social, because it makes it harder for people to move from regions where property prices are low to more prosperous places where home values are higher
When the tax system imprisons people in this way, it is just wicked.Talented northerners should not be compelled to write an enormous cheque to HMRC to take a promotion down south. Getting rid of stamp duty should be part of levelling up.
Rishi Sunak may fret that getting rid of the tax would deprive the Exchequer of income at a time when cash is sorely needed.
Revenues from the levy on residential properties have been running at about £8.4billion a year prior to the pandemic measures. That would, on the face of it, leave a hole in the Chancellor’s pocket – but fortunately, there are offsetting factors.
Without stamp duty, many more homes would change hands, bringing a slew of spending and job creation which would generate tax receipts in abundance.
It may be there does need to be some form of taxation on residential property and whatever guise this takes, it is unlikely to be popular.
What is for certain, though, is stamp duty, which suppresses the housing market and curbs job mobility, is an appallingly poor way to go about it.
Home ownership is the cornerstone of the economy and of our society. Any tax that wantonly makes people’s aspirations harder to achieve is a bad one.
Rishi Sunak should show his credentials as a Conservative chancellor and a champion of home-owning democracy by getting rid of it once and for all.
Reprieve on Stamp Duty: ‘Holiday’ on house-buying tax to be extended till summer as Chancellor eyes reform
By Jason Groves Political Editorand Matt Oliver For The Daily Mail
Rishi Sunak is poised to extend the stamp duty holiday until the end of June in next Wednesday’s Budget – and could reform the tax entirely.
The move would benefit an estimated 100,000 buyers whose deals are at risk of collapse due to Covid-related delays.
Property website Rightmove predicted that extending the stamp duty holiday beyond the current cut-off date of March 31 could also generate another 200,000 sales.
The Mail revealed last month that an extension was being considered by Mr Sunak due to disruption caused by coronavirus, with many would-be buyers facing long delays.
Rishi Sunak is poised to extend the stamp duty holiday until the end of June in next Wednesday’s Budget – and could reform the tax entirely (stock photo)
Treasury officials are now also examining the case for reforming the stamp duty system, amid concerns that it distorts the housing market.
The Chancellor introduced a temporary cut in stamp duty last July, scrapping the tax for all sales under £500,000. The previous threshold was £125,000, or £300,000 for first-time buyers.
The changes saved those buying more expensive properties up to £15,000, while many were spared from paying the tax at all.
According to Halifax, house prices jumped by £57,000 across England and Wales in the second half of last year.
But with the country back in lockdown, the Chancellor is said to have decided now is not the right time to risk slamming the housing market into reverse.
Industry experts welcomed the prospect of an extension – but warned this would simply delay the ‘cliff edge’ moment unless wider reforms are introduced.
London estate agent Jeremy Leaf, former residential chairman of the Royal Institution of Chartered Surveyors, said: ‘There are still a lot of people out there who are really struggling to complete in time for the current deadline and this could really be helpful to them.
‘Some started their transactions many months ago – in July and August in some cases – and they are still trying to get it done.
‘Those are the people I feel sorry for and so I hope these reports are accurate for their sakes.’
Tom Bill of estate agents Knight Frank said an extension was ‘inherently fair’, but expressed fears the holiday could have negative effects if it lasts too long.
‘At the moment you have a system that has become overwhelmed because of the sheer volume of deals going through,’ he said.
‘Many buyers and sellers have had their completion dates put at risk by that through no fault of their own.
‘That being said, there comes a point where the stamp duty holiday can overstay its welcome and become harmful – if an ever-shifting tax cut starts to create speculation that leads to inaction – and so there does eventually need to be some kind of finality.’
He also warned a longer holiday could add to ‘downward pressure’ on prices expected this spring, as more families put their homes on the market after schools reopen.
The Treasury says 90 per cent of buyers pay no stamp duty at all under the current rules, with average savings at around £4,500. It declined to comment on speculation ahead of the Budget.