The Council of Mortgage Lenders has criticised Stamp Duty, saying it is a “badly designed tax” which discourages transactions, causes market distortion and reinforces problems caused by an acute shortage of supply.
The CML also says that it conflicts with measures such as Help to Buy, which seeks to help borrowers who can afford regular mortgage payments but struggle with the up-front transaction costs.
The CML points out that even with Help to Buy in place, many purchasers are still going to have to find the cash to pay Stamp Duty.
According to the CML, nearly half of first-time buyers in London pay Stamp Duty at a higher rate.
The organisation also says that this year, the Government’s take from Stamp Duty is likely to be “not far away” from the previous peak of £6.7bn, even though transactions this year are likely to be around the one million mark compared with 1.6m in 2007.
The take from Stamp Duty is predicted to grow by a further 50% in the next five years.
The CML says Stamp Duty needs a fundamental reform, including the removal of the ‘slab’ structure – the thresholds at which higher rates kick in.
It says there is evidence that some people who would normally move to be nearer new jobs stay put because of Stamp Duty costs, meaning that the tax contributes to the strain on infrastructure.
While there are reforms in Wales and Scotland, the CML also says these will have little overall effect, with 94% of Stamp Duty currently paid by English house buyers.
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