Stamp Duty on the purchase of homes should be abolished, Britain’s leading economic think tank has said.
The Institute for Fiscal Studies said that Stamp Duty is an ‘obviously stupid’ tax which stopped people from moving home because of the huge tax bill associated with buying a new property.
It wants Stamp Duty to be completely scrapped as the first measure in a wholesale reform of Britain’s current taxation system, which it branded a ‘mess’.
Paul Johnson, director of the IFS, said there was “little about the UK tax system which looks like it was deliberately designed”.
He said of Stamp Duty that it is a bad tax because it reduces the number of transactions.
The IFS call will have the enthusiastic backing of developers and estate agents, with the property industry long calling for a reform of Stamp Duty which they say distorts the market.
It is currently payable on all homes costing £125,000 and above (or £250,000 and above for first-time buyers). The highest rate is now 5% on £1m-plus homes.
In addition to scrapping Stamp Duty, the IFS has proposed wholesale changes to Council Tax, land taxes, rental property taxes and to VAT, fuel duty and income tax.
It wants to see Council Tax replaced with a new tax, where people would pay a percentage of the value of the property they live in. All homes would have to be revalued, as Council Tax is based on 1991 valuations – something which the Institute described as ‘ridiculous’.
It also wants to see income tax and National Insurance merged as one, while inheritance tax should be changed so that the chief beneficiary pays tax, rather than it being a tax on the dead person’s estate.
The Institute also called for VAT to apply to all purchases, with current exemptions such as food and children’s clothing abolished.
A spokesperson for the Treasury said: “The Government has embarked on a programme of ambitious reforms of the tax system to address the instability of recent years.
“These are based on clear principles to support growth, reward work, reduce complexity and increase fairness.”
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Comments
For me the argument about SDLT has always been obvious. Keep the bandings the same, remove the exemption for FTBs and make the vendors pay it.
No FTB will ever then need pay it, it will penalise the greedy and all those boomers who have inadvertently benefitted from an equity windfall. Simples.
P.S. Income tax was designed to pay for the Napoleonic wars, so why pay it at all now?
I've a new idea, why not tax windows, or bricks?
Chesney- Are you that silly little ginger thing on Coronation street?
Fun Boy Agent... "I just read tha the Lib Dems are unhappy that council tax rates remain based on 1991 valuations."
Yeah - that's because they are all closet HPCers, and firmly believe that due to their movement, prices will fall to EIGHTEEN NINETY ONE prices - therefore they will all be paying too much council tax!
Like the house prices, they want to pay the applicable property taxes in groats and farthings ;o)
I just read tha the Lib Dems are unhappy that council tax rates remain based on 1991 valuations. And they want local authorities to be given the right to set property tax levels.
Whether this would be part of a new 'mansion tax' is not yet clear. But if you own a property (and land) worth more than £2m then you could expect to shell out around 1% of this value every year. That's £20,000 a year. Such a tax could still hit around 70,000 properties.
Rosalind,
looks like you needto ping the re-loader
ry this:
You are riding along on your push bike on a wild, stormy night. You pass by a bus stop, and you see three people waiting for the bus:
1. An old lady who looks as if she is about to die.
2. An old friend who once saved your life.
3. The perfect man (or) woman you have been dreaming about.
Which one would you choose to offer a ride to, knowing that there could only be one passenger on your push bike?
Think before you continue reading. This is a moral/ethical dilemma. A good estate agent has no trouble with the correct answer.
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You could pick up the old lady, because she is going to die, and thus you should save her first; or you could take the old friend because he once saved your life, and this would be the perfect chance to pay him back. However, you may never be able to find your perfect dream lover again.
The answer is: Leave them alone, because none of them wants a bumpy ride and get drenched on your bike. After all they are waiting for the bus to get them home safely.
Never forget to think "Outside of the Box".
Try this:
You are driving along in your 2 seater sports car on a wild, stormy night. You pass by a bus stop, and you see three people waiting for the bus:
1. An old lady who looks as if she is about to die.
2. An old friend who once saved your life.
3. The perfect man (or) woman you have been dreaming about.
Which one would you choose to offer a ride to, knowing that there could only be one passenger in your car?
Think before you continue reading. This is a moral/ethical dilemma. A good estate agent has no trouble with the correct answer.
-
-
-
-
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You could pick up the old lady, because she is going to die, and thus you should save her first; or you could take the old friend because he once saved your life, and this would be the perfect chance to pay him back. However, you may never be able to find your perfect dream lover again.
The answer is: "You would give the car keys to your old friend, and let him take the lady to the hospital. You would then stay behind and wait for the bus with the woman/man of your dreams."
Never forget to think "Outside of the Box".
@Chesney. Don't be silly.
Stamp Duty should be set at 0.5% across the board, no matter what the value, with no exemptions. It could even be taken a step further and be payable by both the buyer and the seller.
That way, everyone pays, and it's fair because it's a straightforward percentage of that property's value. It's a small amount, so the argument of 'penalising poor people' is negated. if you can't afford to find half a percent, then surely you can't afford to buy a house in the first place.
Look,
This all looks quite noble and on the surface of it would be nice but lets look at the real issues – the SDLT for an FTB is nothing anyway (to £250K) and for most people in the country its 1%..........................just 1% - now for donkeys years buyers rustled up the money for price increases of 1% without blinking, do they really think that effectively making houses 1% cheaper will help anyone – I mean March made houses 1% cheaper and it’s the equivalent of lobbing a welly down Broad Street – its so small it wont touch the sides / make a difference
……………….and, the last bit – what this country doesn’t need right now is a tax that is simple, transparent, impossible to dodge for 99.9% of people and cheap for the government to collect to be binned
Jonnie
P.s anyone that points out the varying SDLT bands to me, don’t worry, I do know im just illustrating what affects Mr Average should he actually exist, with his average salary and his average height, willy length and all that
@S A Longden
I agree that local taxes should be per person over 18..
It was tried a few years ago and I believe was called the Community Charge (Poll Tax). It was badly 'sold' to the public and a cardinal error was made - it applied whether one had an income or not (e.g. non working wives) Of course the unions orchestrated massive resistance to it and it was scrapped. Should it not be reinstated again properly but with allowance for those with no income?
Most taxes are mis-applied. Why should council tax, which is for services be in any way related to the 'value' of the house? It should be per person who lives in this country. Why should there be VAT at all when we pay income tax? Far too much tax, far too little return for it, and far too many fat cats living off us poor serfs who have no way of righting the unbalanced system.
I think that stamp duty should be higher. Say 10% of purchase price for all properties. This would encourage people to buy houses to live in rather than for speculation. While we're at it, capital gains tax should be increased as well.
@Paul
I tend to agree that this tax will not be scrapped and that the IFS 'suits' are talking rubbish on this occasion.
However, banding would seem sensible but how many levels would be required to make it fairer and not continue to distort prices?
Words fail me....what a useless set of suggestions, do these people live in the real world?
'Scrap Stamp Duty'......A tax that raises millions and millions of pounds??? They will only replace it with some other tax which will end up costing us more money in the long run!
The Institute of Fiscal Studies need to be ashamed of themselves for 95% of these suggestions.
Ridiculous....
So such and such tax is stupid and ridiculous because it costs people money?
OK, thanks for that.
Great idea to abolish it but replace it with VAT! I dont think so but lets look at it:-
£250,000 purchase = stamp duty of either nil or £2,500
£250,000 purchase = nil stamp but at 5% VAT as is on fuel £12,500 or at the standard rate of 20% £50,000.
The IFS are talking out of what they should be sitting on. May I suggest to this bunch of dimwits yes it is idiotic because the tax is not like any other it is on the WHOLE PRICE and not BANDED.
Keep stamp duty but band it and this will get the market going. Forget the idea of VAT as it will be more costly but then all governments look at giving with one hand and taking twice as much with the other.
But then I am only an estate agent and I dont know nuffink.
"This is nothing more than a way of re taxing people who have already paid tax"
Just like VAT and GCT then.
Most taxes should be abolished, they won't be though.
be under no illusions - stamp duty will not be abolished, it earns the govt billions and is a very easy tax to collect
This is nothing more than a way of re taxing people who have already paid tax on their home purchase.
great news get it abolished.