The £250,000-plus threshold at which Stamp Duty becomes payable at 3% has a ‘devastating’ effect on sales, says new research.
It says there are 930% more transactions of homes priced between £240,000 and £250,000 than between £250,000 and £260,000.
According to the London Central Portfolio which commissioned the research from Cass Business School, 13,866 vendors are forced to sell at discounts of up to £10,000.
It says that 73% of home owners have properties worth between £125,000, when Stamp Duty kicks in at 1%, and £250,000 when it jumps to 3%.
The 3% threshold has not been changed since 2000 when the average house price was £79,242.
LCP chief executive Naomi Heaton said: “The Government need to grasp the nettle and reduce the tax hike at £250,001.
“While it will have a cost to the Exchequer, it will be a drop in the ocean compared with the stimulus packages already introduced.
“The long-term impact for these packages is unknown and probably dangerous, whilst reducing the Stamp Duty rate is guaranteed to make a difference for good, for second steppers and first-time buyers.”
Spicerhaart chief executive Paul Smith added his voice to calls for a review of Stamp Duty ahead of the Chancellor’s Autumn Statement tomorrow.
Smith said: “The Chancellor should revisit the spectre of Stamp Duty which is a major contributing factor to the current property market deadlock. A Stamp Duty holiday on homes under £600,000 will get the logjam moving with an increase in supply of property for sale and will keep prices from spiralling.
“While it’s true that Stamp Duty currently rakes in around £2.12bn annually for the Treasury, it is less than half of what the government is reportedly set to spend on its aircraft carrier fighter jet programme – in excess of £5bn – and a mere fraction of the total cost of the increasingly unpopular HS2 project.”
* There are concerns that estate agency firms could be caught up in a tax clampdown on National Insurance exemptions on partnerships.
There is speculation that it could be announced in tomorrow’s Autumn Statement, with briefings that Treasury officials are said to believe that some firms are “disguising” employees as partners, thereby avoiding employers’ National Insurance contributions.
It is thought that the Treasury could insist on partners being stripped of their self-employed status unless they can prove they have put their own money at risk in the business.
The move could affect estate agents, surveyors and lawyers, where partnerships are commonplace. It would also particularly concern those that distinguish between equity partners and others.
Bill Dodwell, head of tax policy at Deloitte, told the Telegraph: “If they don’t deal with this properly then I do think it’s fairly damaging for the smaller part of Britain’s professional partnerships, which covers sectors like high-street accountancy firms or estate agents. They will potentially be asked for more tax.”
He added: “There is clear evidence that there is a gap here that has been exploited, and so I can understand why it’s right to shut that down. I just hope there isn’t collateral damage.”
Comments
They do want to look like they are helping first time buyers but not at the expense of tax revenues.
The real policy is to ensure HPI continues as this ensures tax receipts go up. .
Remember the £12Bn HTB scheme is an insurance scheme to back £130bn mortgages by the banks
Stamp duty revenue recovers the outlay in 2 years.
When the owners fail to pay back the loan in 5 years they will be forced to handover 20% of any equity earnt on selling
This gives a revenue on top of SDLT.
This is why labour and conservatives like it
It should be called the help to increase tax revenue scheme
"Hmmm - show me ONE tax that IS "fair". Can't disagree with that one PeeBee,
I think we've both hinted that Stamp Duty is a significant income to the treasury, so it's most unlikely that it will ever be scrapped, but I'm still of the opinion that if government want to help first time buyers that upping the lower threshold would have more impact for them than help to buy.
Personally, I'd rather see graduated bands rather than a flat rate across the board, and with the higher rates payable only on the amount after a threshold and not on the whole. At least that way, when members of the Bullingdon Club buy their retirement homes, they will at last contribute something useful to the country!
Peebee - It looks like you and I agree on the fair way forward on stamp duty, we must be wrong!!
I wonder why the government insist on this seemingly stupid band idea ??
Belated 'Good Morning' to you, HC! I trust that it was exactly that! ;o)
It was not until I read your post on the other thread that I realised my 'conscience' decided to wander off this page to carry on debating this subject.
Bringing it back home - he said:
""Just to remind you AGAIN, I'm not an estate agent, I'm not the right person to be giving an opinion on here..."
I think that is a fundamentally flawed statement - SDLT affects ANYONE who buys property over the current threshold of the day; and of course the claim within the content of the main story is that it has a MASSIVE effect on the market.
For what it is worth, MY opinion is that the authors of the report simply do not understand the market.
Their 'findings' are far from rocket science - ANY Estate Agent up and down the land could have told you that ninety nine out of every one hundred sales agreed "around" the Tax thresholds are, miraculously, just under them.
Sorry, LCP - but unless the report was entitled "No $h!t, Sherlock" - they saw you coming and you was royally robbed! But, in fairness, if you needed to pay someone to tell you the obvious - then you got what you deserve!!
My 'conscience then went on: "...but for the record, I think stamp duty is an unfair tax and should be completely scrapped."
Hmmm - show me ONE tax that IS "fair". But he didn't explain why, in his opinion, the tax is unfair - nor did he explain how the Government would 'cover' the "£2.12bn" loss in revenue.
Yes - it's an unfair tax - but it's one that has been with us for CENTURIES so surely by now we've become accustomed to it and therefore work WITH it.
I have said before that he ONLY way to make this tax 'fair and equitable' is to tax EVERY transaction, at the same rate. Then - no thresholds; no 'glass ceilings' to avoid and therefore skew paid prices - no complaints... well... maybe a few!
In order to cover the kind of revenue currently being raked in by the current, 'flawed', system, I reckon that the rate set would need to be 1.5%.
Views/opinions, people?
Good Morning to Peebee and and his conscience. and everyone else
Biffa, do you really think stamp duty causes price rises in London, if so why does it not cause price rises elsewhere, maybe your right?
I think stamp duty should be a % of fee with no thresholds. However with it being such a massive revenue stream into the government coffers dont expect any amount of lobbying to change it unless it comes from the house builders who donate to the Tory party
Interesting comment from Mr Smith, who now tells us that the market is deadlocked, I'm sure I recall only a few days ago something from him saying that Spicer Haart are selling them by the bucketload!
It's not just the £250,000 threshold that is an issue. The lower threshold should, in my opinion be scrapped, which would be a positive help to first time buyers, far more so than Help to Buy, which in many parts of the country seems to be achieving very little. I've never had a problem with those much better off than average paying high taxes, and on the basis that stamp duty is good source of income to the treasury and is therefore unlikely to be scrapped, I'd be happier to see some form of graduated tax starting with a bottom threshold at £250,000 and higher rates payable on the balance where the threshold changes.
I'm sure the transaction figures quoted by Cass are quite accurate, but you don't need to be a genius to work that one out. after all, how many do we sell at £255,000?
(That said, I've got one going along nicely at an agreed price of £260,000 against an asking price of £265,000)
......"The £250,000-plus threshold at which Stamp Duty becomes payable at 3% has a ‘devastating’ effect on sales, says new research.
It says there are 930% more transactions of homes priced between £240,000 and £250,000 than between £250,000 and £260,000."
OH, COME ON!
Methinks 'Cass Business School' researchers urgently need educating in common sense and 'the way of the world' if they are going to produce such MDT"..........
Still at it then PeeBee, don't just tell us that they are wrong, tell us WHY they are wrong, and support what you say with some evidence.
New research? Good heavens, we all know its an issue.
Its not directly devastating, but its effects are profound. Thresholds create a stagnant price then a leap in value rather than graduated increases. No one will ever sell a flat easily for £255,000 so they go on at a price which negates the effect. At £255k, it also promotes attempts at tax evasion with the often requested 'fixtures and fittings' payment which places an agent in a difficult position.
A scheme where you only paid tax on the 'overage' would allow more subtle shifts in values and in my opinion steady the ship.
All that needs to happen is to look at the total SD revenue raised then revise the system to a complete sliding scale like income tax. eg zero up to x, 1% up to X, 2,3,4,5,6,7,8,9,10%
That way properties would not be priced to get round stamp duty and someone paying £251,000 would not pay three times the duty than a buyer at £250,000
or failing that have a 2% band and a 6% band
https://www.gov.uk/stamp-duty-land-tax-rates
www.cooper-adams.com
I have been saying for years that stamp duty is killing the market.
I belive its the biggest cause of prices rises in London. The cost of stamp duty deters vendors from moving up, which manifests itself as aa shortage of stock.
"The £250,000-plus threshold at which Stamp Duty becomes payable at 3% has a ‘devastating’ effect on sales, says new research.
It says there are 930% more transactions of homes priced between £240,000 and £250,000 than between £250,000 and £260,000."
OH, COME ON!
Methinks 'Cass Business School' researchers urgently need educating in common sense and 'the way of the world' if they are going to produce such MDT.
Rubbish! We all work with it and just have to accept that we need to be clever if we are to sell clients' properties between £260,000 and £275,000. We would all like it removed but it is not "devastating the market".
Of course it's not fair but nor is life. Get on with both.
Save this until the mrket really needs it