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TODAY'S OTHER NEWS

Stamp Duty cut could create 40% more transactions, says new analysis

A new analysis of stamp duty suggests that a cut of around a third in SDLT could produce a 40 per cent surge in transactions.

Boris Johnson has made several broad claims that he wants stamp duty to be cut during his premiership, with government insiders saying this could mean the total abolition of SDLT on residential property transactions up to £500,000.

An analysis of what this could mean has now been undertaken by the chief executive of buying agency Ludgrove, Fraser Slater, who is also a former City fund manager.

Unlike some previous studies that purely focus on the impact a cut in tax rates would have on stamp duty receipts itself, the Ludgrove analysis looks at the impact on total tax revenues. 

Slater says that by including an estimate of indirect taxes from property related activity - for example VAT, and corporation and employment taxes from estate agencies, conveyancers and removal firms amongst others - the analysis achieves a more accurate assessment of what a stamp duty cut would mean for total tax revenue. 

Ludgrove’s favoured analysis says that a 36 per cent reduction in stamp duty rates across the board could mean a huge 40 per cent rise in residential transactions in England alone per year.

That would in turn generate an extra £1.44 billion in tax revenue and £8.36 billion in business revenue. So taken together this would mean a £9.8 billion boom for the economy and the Treasury.

If the burden of duty was shifted from buyer to seller - as some believe Johnson is considering - then even more money would be recouped, suggests the Ludgrove analysis.

Slater says: “Our analysis demonstrates the effect of what economists describe as 'The Laffer Curve', namely that tax cuts can generate more tax revenue and equally importantly more economic activity - upon which taxation itself depends. 

“We exclude the impact of shifting the liability to the seller and we would encourage the Exchequer to consider such a move. By cutting stamp duty by 36 per cent and moving the liability to the seller we are confident that our £9.8 billion estimate would be comfortably exceeded”.

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    Stamp tax is a bad tax, both cutting it (or removing it) and / or transferring in to the seller (or a combination of both) will add much liquidity to the market - as we, with others, have been saying for some time. Increasing liquidity does not in itself increase prices, that is driven by supply and demand. I agree that we will see many more sellers and transactions would increase a lot. Stamp tax at the moment is really a tax on the future benefit of living in a property and I thought we were trying to increase home ownership so removing the tax on that benefit would seem a very good first step !!!

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    Why does it take so long for an expert to come up with this advice. Anyone who understands property with basic economics skills know this.

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    But not transferring to the seller, they have already paid stamp duty. Remember, halve the tax, double the transactions equals same tax revenue. Plus all the other spin offs. Boris knows this, i have explained this too him verbally and in writing.

  • Paul Barrett

    Unfortunately political imperatives ignore commonsense things like the Laffer Curve.
    Reducing taxation inspires the idiot left-wing to maintain that the Tories are giving away taxes to the rich while the alleged poor suffer.
    Actually no one is poor in the UK.
    Welfare provides a rather nice workless lifestyle.
    Such welfare is in the upper 25% of income earners in the UK.
    It is those who go to work FULL-TIME that are invariably worse off than those on full welfare.
    But the Tories are pandering to all the idiot left-wingers.
    They hope to gain votes from them.
    Absolutely delusional but that is what drives the bonkers SDLT situation.
    Everything all you EA state makes perfect business sense for the industry and ultimate tax income but Govt chooses to ignore the industry cos of course Govt knows better.................NOT!!!

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    The problem is that we live in a democracy and pay for votes like Greece.

  • Andrew  Estate Agent

    I hope that Boris has a better time dreaming up a Brexit plan as moving the stamp duty burden just raises selling prices for all, and squeezes the first time buyer at the bottom who has no property to add the stamp to.

    What do I mean? Mr Vendor you now have to cover stamp duty cost on the sale of your property, What you want to increase your asking/ selling price by an amount to cover this proposition?

    Excellent news, that will stimulate the property market by increasing the sale price of your 500k instruction to 515k overnight.

    Also, it will help all of those nice national homebuilders who offer to pay the stamp duty as a deal sweetener already, they would need to offer a further incentive to stay ahead of the curve, which of course would be absorbed in even higher selling prices, brilliant Boris ideas, sounds like a real stimulus to the industry, ever thought about asking estate agents for their views?

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    "If the burden of duty was shifted from buyer to seller" what rubbish, a tax is a tax, it matters not who pays it, only the level. Doh.

  • Velgram Quaid

    "Mr Vendor you now have to cover stamp duty cost on the sale of your property, What you want to increase your asking/ selling price by an amount to cover this proposition? "

    Something is worth what people are prepared to pay for it. Increasing your asking price because you think a new stamp duty law means you are entitled to, will have only one effect, to dissuade buyers.

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    Its a crime having this Duty which is psyable every time a property is sold. The Cromwell war is long gone so should this thieving tax be.

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