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Why should the government reduce the burden of Stamp Duty?

Ask any Conveyancing Solicitor or property specialist what they think the greatest obstacle to buyers is aside from getting a mortgage, and they’ll likely all say the same thing – If the government is in the least concerned to get the house market moving, then apart from taking action to improve the availability of mortgages, they must take another look at stamp duty rates.

The top rate on houses is now 10 percent where the price is over £925,000 and is 5 percent on purchases between £250,000 and £925,000. Although perhaps not many people pay more than £900,000 for their house, there are many areas where properties regularly fall within the 5 percent band and this equates to £20,000 for a £600,000 house.

When I first started working in property Conveyancing, the maximum rate of duty was 1 percent, which applied to purchases over £6,000 (Yes, only £6,000!). I can remember that even in the best part of the Essex town where I worked, few properties reached over £6,000, and certainly the average price for ordinary houses was below the level at which any duty was payable.

Stamp duty is paid by buyers, so when you are having to pay all the other costs involved in buying a house and moving home, it is a significant extra expense. In fact, it usually amounts to the highest expense on a purchase transaction. If the government took the step of reducing the rates to more reasonable levels, surely this would help to encourage buyers back into the market?

Although the government’s ‘take’ on each transaction might be less, if there were more sales going through there would be a higher number of taxable transactions, the overall tax income to the government would not necessarily fall.

Stamp duty (or more properly now, Stamp Duty Land Tax or SDLT) is generally payable on the purchase or transfer of property or land in the UK where the amount paid is above a certain threshold. Although governments have increased the amounts of these thresholds over the years to keep pace with rising property prices, successive governments have over the last few years introduced more tax bands with higher rates applicable for each successive band.

Nowadays, the majority of house buyers have to pay SDLT, certainly in London and the south-east. The government is obviously happy to rake in this tax, and although they provide some relief for first-time buyers, this does not help many people.

First-time buyers are exempt from paying SDLT where a property is valued at up to £250,000. They will pay 2 percent SDLT on anything above £250,000 to £500,000. There is no further exemption for properties valued at more than £500,000.

First-time buyers purchasing a shared ownership property are exempt from SDLT where that property is valued at up to £500,000.

LTT replaced Stamp Duty Land Tax in Wales in April 2018. There is no specific first-time buyer exemption. However, no tax is paid on any land or property transaction up to the value of £185,000. Find out more about the LTT rates in Wales here.

Although various wonderful schemes have been thought up to try and avoid SDLT, these are generally regarded with suspicion and the government will usually legislate to close any loopholes. Conveyancing Solicitors are generally wary of these schemes, as they are aware that HM Revenue and Customs have draconian powers and do not want to find themselves being prosecuted for trying to defraud the revenue.

Many home owners find they cannot sell their property because there are so few buyers on the market. It would surely help to reduce SDLT rates to more reasonable levels, in line with those which applied in the past.

This article was updated on December 17, 2018 to reflect changes in SDLT rates, first-time buyer exemptions and the introduction of the Land Transaction Tax (LTT) in Wales in April 2018.

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