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Stamp Duty is a mess: should it be scrapped or simplified?

Research by Estate Agent Today reveals that there have been 12 different stamp duty regimes in the UK since the Millennium.

What’s more, the duty has changed over decades from being a simple transparent tax to a complicated obstacle for buyers to overcome. 

Stamp duty is back in the news again this week with the revelation that the large scale 2014 reforms introduced by then-Chancellor George Osborne appear to have resulted in a £317m drop in Treasury income during the second quarter of this year.

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On top of that, the additional homes stamp duty surcharge appears to have led to an exodus of landlords, prompting dire warnings of long-term rent increases. 

Stamp duty was introduced in the 1950s and was straightforward: you paid nothing at all on a home up to £30,000 and then one per cent of purchase price above that threshold. The average priced home was only £20,000 so relatively few paid any stamp duty. 

In the 1990s the threshold was doubled to £60,000 to match escalating prices, and from the year 2000 there were multiple exceptions, additional thresholds and occasional ‘stamp duty holidays’ depending on the market and the fortunes of the wider economy. 

In the 18 years since the Millennium there have been 12 regimes if you include the small amendments like the first time buyers’ duty holiday introduced in 2010 and scrapped in 2012, and the larger stamp duty exemption for first timers announced last November.

While many in London argue that the most recent large scale change in how the duty is applied - in December 2014 - has directly led to a slowdown in high-end sales, George Osborne himself points out that deals done at £937,000 or below attract less duty than immediately before that 2014 reform. 

However, as is clear from the data below - which applies to England and Northern Ireland - stamp duty has become increasingly complex in recent years and now (compared to, say, just a generation ago) it is significantly more expensive for many buyers in both absolute and relative terms.

Little wonder, perhaps, that The Times this month described the housing market as dysfunctional and that stamp duty made it worse.

1. March 28 2000 to March 17 2005:

Bands:

0% up to £60,000;

1% over £60,000 and under £250,000;

3% over £250,000 and under £500,000;

4% over £500,000.

Revenue:

2000/01    -    £3,864m

2001/02    -    £4,132m

2002/03    -    £5,011m

2003/04    -    £4,986m

2004/05    -    £6,251m

-

2. March 17 2005 to March 23 2006:

Bands:

0% up to £120,000;

1% over £120,000 and under £250,000;

3% over £250,000 and under £500,000;

4% over £500,000.

Revenue:

2005/06    -    £7,454m

-

3. March 23 2006 to September 3 2008:

Bands:

0% up to £125,000;

1% over £125,000 and under £250,000;

3% over £250,000 and under £500,000;

4% over £500,000.

Revenue:

2006/07    -    £9,635m

2007/08    -    £9,958m

-

4. September 3 2008 to January 1 2010:

Bands:

0% up to £175,000;

1% over £175,000 and under £250,000;

3% over £250,000 and under £500,000;

4% over £500,000.

Revenue:

2008/09    -    £4,796m

2009/10    -    £4,886m

-

5. January 1 2010 to March 25 2010

Bands:

0% up to £125,000;

1% over £125,000 and under £250,000;

3% over £250,000 and under £500,000;

4% over £500,000.

6. From March 25 2010 - as above but with temporary 0% for first time buyers up to £250,000.

7. April 2010 to March 21 2012:

Bands:

0% up to £125,000;

1% over £125,000 and under £250,000;

3% over £250,000 and under £500,000;

4% over £500,000 and under £1m;

5% over £1m.

8. From January 1 2012 first time buyer rate of 0% up to £250,000 removed

Revenue:

2010/11    -    £5,961m

2011/12    -    £6,125m

-

9. March 21 2012 to December 3 2014:

Bands:

0% up to £125,000;

1% over £125,000 and under £250,000;

3% over £250,000 and under £500,000;

4% over £500,000 and under £1m;

5% over £1m and under £2m;

7% over £2m.

Revenue:

2012/13    -    £6,907m

2013/14    -    £9,273m

2014/15    -    £10,738m

-

10. December 3 2014 to current day:

In late 2014 the government scrapped the slab system meaning stamp duty was payable only for that part of the property’s value that fell into each duty bracket. 

Bands:

0% up to £125,000;

2% over £125,000 and under £250,000;

5% over £250,000 and under £925,000;

10% over £925,000 and under £1.5m;

12% over £1.5m.

11. From April 1 2016 to the current day there has been an additional 3% stamp duty surcharge on additional properties. 

12. From November 23 2017 first-time buyers in England and Northern Ireland pay zero stamp duty on the first £300,000 of any home; for properties costing up to £500,000, first-time buyers will pay no stamp duty on the first £300,000, but will pay stamp duty on the remaining amount. Any property over £500,000 does not qualify for stamp duty relief, and the standard rates of stamp duty will apply.

Revenue:

2015/16    -    £10,682m

2016/17    -    £11,766m

(Sources: HM Treasury, Statista, Stampdutyrates.co.uk, L&C mortgage brokers)

Poll: Stamp Duty should be scrapped

PLACE YOUR VOTE BELOW

  • icon

    Who seriously thinks The Government would scrap stamp duty?! Great real folks - it is a major revenue stream for our tax crazy Chancellor (my local MP). BUT, George Osborne made a schoolboy error - he thought he could stiff the rich with mad stamp duty levels. This has filtered down the chain and we now see the result - a much poorer, less fluid property market. Stamp duty doesn’t need removing, it needs cutting. Previous Chancellors have cut taxes and seen the massive increase in tax take - this Chancellor is simply a scaredy-cat.

  • Simon Shinerock

    The biggest problem with Stamp duty is it reduces mobility and encourages stagnation. Some stamp duty is justifiable but the current regime amounts to misguided social engineering

  • Kieran Ryan

    Great Article, i agree that stamp duty has to stay, but certainly NOT in it's current form. Osbourne was a complete fool to create an unworkable SDLT system. The government do not realise what the property industry brings to the UK economy as a rule. Activity in the buy to Let category in London has ground to a halt, sales of properties are extremely low. There would be NO embarrassment in doing a 'U' turn on this, we all make mistakes, enough is enough.

  • icon

    Greed has caused the slump in revenue, the chancellor should scrap the BTL additional 3% and reduce significantly the duty between £950.000 and £2 mil the tax levels have literally stamped out the ability for people to buy a family home in London.

  • James Robinson

    Its been reported that property transactions are 75% lower than during the 2008 financial crises so why does no one talk about the lost revenue from all the ancillary businesses. I worked out that, in Prime Central London, the lost VAT on just the estate agency fees came to over £155,000,000 then there are the removal firms the solicitors, the surveyors, the builders, the mortgage companies, all the PAYE and of course the capital gains tax for investment property sales a house sale generates. If an increase in Stamp Duty is at the loss of all these other tax revenues then this has nothing to do raising tax, In fact it appears to be a cynical exercise in buying envy votes with an envy tax on the wealthy. Our property industry has been the envy of the world and a real incentive for people to come and be part of our economy. The conservatives has thrown our whole industry under the bus for their own political expediency. One can either have a high tax low volume property market or a low tax high volume property market both, of which produce similar revenues but the latter allows growth. How can we put our faith in a Chancellor who is discussing raising Stamp Duty when its receipts are already falling through over taxation. Not since Harold Wilson's 98% tax on 'un-earned income' have we seen a finer illustration of Laffer Curve.

    James Robinson ( a seriously disillusioned conservative)

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    So James, I take it you are doing your bit for the health of market by refusing to overvalue and generally trying to get price levels down to a point where people can afford to buy again? Hmmmm ... thought not. Maybe if the property industry paused to look in the mirror it would realise that most of the problems we face today could be solved amongst ourselves.

     
  • icon

    The lack of transactions at the top end of the property market has nothing to do with Stamp Duty. It is a classic smoke screen peddled by desperate agents who don't want to face the truth: that prices are ridiculously overvalued and need to fall substantlially to bring them back into line with average earning. Once that happens buyers will return and the market will function once again.

    James Robinson

    Hello James
    It is clear that you do not operate in prime central London. Your argument is that of someone complaining the price of Aston Martin DB5s is far too high and should really be inline with affordability.You are confusing our market with the rest of the country and greater London. The majority of the properties we deal with are neither in chains nor mortgaged. These are assets not homes, or if they are homes, they are one of a portfolio of properties. Their high values are born from their paucity and the buyers desire to own a super prime property in a super prime part of a super prime city. Of course London is stupidly expensive but when you have too few properties being wanted by too many millionaires the prices hold or rise. Incidentally as agents we have a fiduciary duty to get the highest price for our vendors so it is our duty to drive prices upwards, although overvaluing is not the same thing at all.
    For context; we specialise in mews houses around Hyde Park and have experienced 3 years of year on year growth

     
    Brit Miller

    Surely that is a big part of the problem that people are treating housing as an assest class rather than a home. There was a great deal of damage post credit crunch with all the laundered money flowing into central London buying up homes sending massive price ripples all across London. The end result was ordinary decent people priced out in outer areas. The stamp duty changes were a welcome change to reduce this dead. Yes the market has stalled but as soon as people get a dose of reality and see that the bubble froathing prices of 2013-14 were unsustainable and lower their prices we can get transactions up. Personally I belive there should be more taxes on those who leave homes empty to force them to sell up. Cash box homes are morally wrong and bad for the economy as a whole.

     
  • icon

    "On top of that, the additional homes stamp duty surcharge appears to have led to an exodus of landlords"

    No, not at all true. The exodus of landlords has been caused by S24 - the phased restriction of mortgage interest relief. In addition it is the additional SDLT, combined with S24 that is preventing landlords buying properties.

    Some landlords have bought of course but as there are 46,000 fewer properties in the PRS than this time last year, over 50,000 families have been displaced. Many of them are on low incomes and struggling to find somewhere else to call home in a shrinking market. The very predictable result is a massive surge in councils using emergency accommodation. The BBC reports "Costs rose from £460m to £690m over the period, freedom of information figures from 31 (London) councils show". If you extrapolate that across the country but knock a bit off because London is likely to have a greater problem then we're looking at something like £1.75bn. Not a bad result if you happen to own a B&B and will take council tenants.

    On the other hand if you're a tenant then you've lost your home. You might very well have had to dispose of most of your possessions as you can't take them into a Travelodge. Even if the Council then find you somewhere to live how will you ever get back on your feet? You might have no furniture, no crockery, no bedding and little left of the kids toys. The only people that will do well from that situation will be the doorstep lenders as people will doubtless borrow to buy the necessities of life.

    My own view is that Osborne's attacks were about short-term tax take but it's costing a fortune and less tax is now being taken. The tax that will be still taken will generally fall on the less well-off as tenants find their rents rising.

    If you believe the guff from Osborne and the Treasury that it is all about increasing the number of owner-occupiers then what we have is a clear case of social cleansing. I'd never have thought we'd see that in the UK. It's a disgrace.

  • James Robinson

    I agree Britt, but this is something that happens all over the world, you think its any different in Venice or Rome? This type of property investment and money laundering are not unique to London. its everywhere, however much I want to live in the empty Admiralty Arch or in one of the empty flats in Hyde Park One I know that it is now, and will probably always be, beyond my reach regardless of what tinkering the government do. Even if their rental values halve I still wont have the £25k or so a week to rent one and nor, I doubt, will you. These are the ghettos of the rich and, without the help of the Bolsheviks or Madam Guillotine, always will be. Please remember that not all of these owners are Russian Mafia or aggressive investors. Many are owned by families, pension companies and firms that you may own shares in so one must take a much larger over view than simply bashing the rich and complaining that its not the post war era when you could buy these buildings for next to nothing.

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