Rising cost of homes provokes Stamp Duty debate

Figures just released by HM Revenue & Customs show how much the government is profiting from rising home prices.

In 2013-14 HMRC collected as much Stamp Duty from property buyers in England as it did at the height of the last property boom in 2007-8, despite a lower number of homes changing hands now than then. Stamp Duty Land Tax or 'SDLT' is administered by conveyacing lawyers and property solicitors immediately after a conveyancing transaction competes.

These figures have provoked a debate as to the need for Stamp Duty to be abolished or at least substantially amended. Yet while Chancellor George Osborne has magnanimously allowed the Scots to collect Duty themselves (and to make drastic alterations in the way it is calculated) the chances of buyers in England or Wales seeing any real changes still look remote.

England contributed £6,125m to the Revenue's coffers in the tax year 2013-14, accounting for 95% of the total Stamp Duty paid on residential properties. Scotland accounted for 3.3%, Wales 1.4% and Northern Ireland 0.3%.

Home-buyers in London and the South-East are hit hardest by Stamp Duty

Within England, residential transactions in London contributed the most revenue (£2,720m), followed by the South East (£1,380m). This is hardly surprising given the way that property prices in those areas have risen while the Chancellor has made no adjustment to the tax bands and has imposed yet higher rates on high-value homes.

Hard-pressed home buyers in London and the South-East not only have to pay more for their homes, they also have to pay higher amounts of Stamp Duty thanks to the archaic way this tax is calculated.

Buy a home for between £125,000 and £250,000 and the duty will be 1% of the purchase price. But pay anything over £250,000 (up to £500,000) and the duty will be calculated at 3% on the whole of the price.

So for a home costing £249,000 the duty would be £2,490 while on one costing just £2,000 more the buyer would have to pay £7,530. This is known as the 'slab' system.

Fewer and fewer homes exempt from Stamp Duty

According to the Land Registry's figures the number of homes sold in the lower Stamp Duty bands actually decreased during the last year while the proportion in the higher bands increased.

Since there was an overall increase in the number of homes sold since the same time last year this clearly demonstrates that more and more properties are falling into the higher duty bands and buyers are being forced to pay more tax.

The irony is that the government keeps saying that it is trying to encourage home ownership and has pumped large sums of money into Help to Buy and other similar schemes. But at the same time it has done nothing to reduce the tax burden that most buyers now face.

Stamp Duty castigated as a “tax on families and first-time buyers”

Paula Higgins, Chief Executive of the HomeOwners Alliance, says these latest figures show that Stamp Duty “is now a tax on families and first-time buyers buying homes to live in as they have to save thousands to pay this upfront tax"

She added “These figures show they must be blinded by the sheer amount of money they are raking in. George Osborne is addicted to stamp duty and can't admit to the need for reform.”

“If the Government was serious about helping first time buyers, the stamp duty exemption threshold would always be above the average house price, so ordinary homebuyers don't pay”.

But based on the Land Registry's figures for completed property sales in England and Wales during July only about 4% of homes were priced below the Stamp Duty threshold of £125,000.

Yet back in 1993 there was only one rate of Stamp Duty – 1% – and it kicked in at £60,000, which was more than the average house price at the time. So most buyers never had to worry about it.

Tax bands have not been adjusted in line with rising home prices

Since then successive governments have taken advantage of rising home prices to collect more and more tax. The present government has added some new bands at the top for homes over £1m., but has otherwise left the tax bands largely unchanged since it took office.

Organisations from all sides of the political spectrum, including the TaxPayers’ Alliance, the Institute of Directors and the Institute for Fiscal Studies have concluded that Stamp Duty should be abolished. Yet still the government continues to turn a deaf ear to pleas for change.

Perhaps they should remember that it was the imposition of the Stamp Act of 1765 on the American colonies that was one of the sparks which led to the American Revolutionary War.



by admin
Monday 14th of September 2015 09:34:29 PM