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Stamp Duty: pressure building on government for more reforms

Pressure is continuing to build on the government to reform stamp duty in next month’s Budget.

Firstly a group of senior financial professionals is warning Chancellor Phillip Hammond against changing stamp duty to address ‘generational fairness’ when a more fundamental reform could achieve more.

There has been widespread speculation in recent days that Hammond, in his November 22 Budget, will make some effort to reduce stamp duty for first time buyers, perhaps particularly in London. 

But now the Association of Accounting Technicians - which has already called for stamp duty generally to be levied on sellers, rather than buyers - says a change to address the specific problems of first time buyers would be “costly, complicated and risky.”

Phil Hall, head of public affairs and public policy at the AAT, says switching stamp duty to buyers would “address generational fairness by immediately removing all first-time buyers from the tax whilst simultaneously protecting the £8.6 billion of much needed revenue that it generates.” 

He adds: “It would also help millions of existing homeowners because those moving up the housing ladder would only pay duty on the lower priced house they are selling rather than the higher priced one they are buying. Downsizers, typically the elderly, would have to pay duty on the home they are selling rather than buying but in most cases they have no mortgage and significant equity so are probably best placed among all homeowner types to pay a little extra.”

The association, which has over 140,000 members - 90,000 of them student accountants who, the body says, will be first time buyers now or soon - says the switch in liability away from buyers would increase transaction volumes, maintain existing revenue from duty, and improve mobility up the property ladder.

Secondly the Daily Telegraph - a long-time critic of stamp duty’s effects on house moving, especially at the higher end of the market - has unearthed figures suggesting that the charge is currently confusing for many sellers and buyers alike.

There is particular confusion over the application of the stamp duty surcharge, the additional three per cent levy introduced in April 2016 and imposed on additional homes - chiefly buy to lets and holiday homes.

“[The Telegraph] can disclose that HMRC’s customer service helpline received more than 5,000 queries about stamp duty in the three months after the surcharge was introduced” says the newspaper.

“Although this number reduced to 655 for the same period this year, many readers continue to report receiving garbled, contradictory advice from the tax officials. In other cases some are being forced to wait for almost two months for questions to be answered. This has the potential to derail property transactions.”

Climate Change minister Claire Perry has already stated that the government is looking at how to achieve ambitious energy efficiency targets, with stamp duty cuts one of the options floated as part of her department’s Clean Growth Plan, released last week. 

One voice suggesting stamp duty cuts may not be the answer in London is the capital’s free daily newspaper the Evening Standard - edited by former Chancellor George Osborne, who engineered the last major reform of stamp duty in December 2014.

The Standard, in an editorial, cautions: “Stamp duty amounts to two per cent of the value of homes up to £250,000 and five per cent of those worth between that and £925,000 — a category in which many London homes fall.

“The average first-time buyer here faces a tax bill of £11,427, based on the latest Land Registry figures. Relieving first-time buyers of this cost would help them, though this has been tried before and has not in itself been transformative. Indeed, by increasing demand it could in fact push up prices.”

  • Simon shinerock

    These types of reforms can’t be ‘transformative’ for the market as a who,e because they fail to address the fundamental issue of under supply caused by the long term failure of social housing policy and planning decisions. The current stamp duty system strongly subdues transactions in the Lettings market and at the top end. The law of unintended consequences operates here in that the current system also subdues aspiration and ambition with the subliminal message that ‘success is bad and will be penalised’. The proper lesson we need to teach our electorate is that 50% of 300 is more than 100% of 100.Once learned they won’t be so easily hoodwinked by short sighted selfish politicians trying to convice them it’s possible to get a pint out of a half pint pot.

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