A debate on Stamp Duty ended with a Treasury minister rejecting calls for the threshold to be raised to £500,000 and for first-time buyers to be exempt.
David Gauke, treasury exchequer secretary, said the £9.3bn Stamp Duty Land Tax raised last year was an important source of revenue.
He said: “Frankly, it’s money we need.”
Earlier, Tory MP Anne Main, who represents St Albans, had called the tax “an untouchable cash cow”.
Main led the 90-minute Parliamentary debate on the tax at Westminster Hall, where she and other Conservative MPs said the tax distorts the housing market and puts people off moving.
They also called for first-time buyers to be exempt, saying they were being prevented from getting on to the housing ladder, and argued that the tax should be linked to house price inflation.
Stamp Duty was described as a “middle class postcode tax” which forces children to squat in their parents’ homes like “overgrown cuckoos”. Main said that scrapping Stamp Duty on homes worth less than £500,000 would fuel economic growth and increase home ownership. She said the Treasury would not notice any fall in receipts if it stopped squandering money on projects such as the Lib Dems’ free school meals.
Main, whose constituency has some of the highest house prices in the country, said: “Stamp Duty Land Tax is a strong contender for the worst designed tax, since the relevant rate applies to the full sale price.
“The Government should tackle the unfairness of paying Stamp Duty on ordinary homes below £500,000.
“Unless we tackle Stamp Duty it is going to be an ever-increasing obstacle to property ownership.”
The Conservative MP for leafy Esher and Walton-on-Thames, Dominic Raab, said the tax raises around £43m a year from his constituency alone.
He said: “If the 3% band had risen in line with inflation, it would now only be levied on homes over £1.3m.”
Tory MP for similarly affluent Richmond, Zac Goldsmith said by 2017, 96% of homes in his constituency would be in the 3% bracket.
Calling for Stamp Duty for first-time buyers to be scrapped, he said: “The current system makes no sense at all.”
Responding for the Government, Gauke said all taxes are kept under review.
* Mortgage lenders have issued an “election manifesto”, saying that whoever wins power next year should take decisive action on the housing market.
The Council of Mortgage Lenders says that measures should include increasing the supply of housing in all tenures and the reform of Stamp Duty.
Paul Smee, CML director general, said: “There are many things that the mortgage industry can and will do to promote a healthy housing market. But it is also crucial to have strategic public policy for housing that is clear, deliverable and long-term.”
Comments (9)
Typical cynical Treasury comment (of any political colour). Eric Walker has hit the nail on the head (as usual). There is no other tax in this country (as far as I am aware) which is so blatantly unfair and which causes such massive disruption in the housing market. With all this mealy-mouthed stuff from politicians wanting to help, you'd have thought they could spare a thought for those at the more modest levels of the housing ladder and right this obvious wrong 🙁
I hope our ministers are reading the above posts in this article (especially Eric Walker's). The present Stamp Duty regime is outrageous. It's akin to legalised robbery. And it's been going on for far too long.
Why all these complicated equations to reform stamp duty? It could and should be simple: no stamp duty on properties worth less than 150,000 (forget the fact that you can only pick up a garage for that price in London, in most parts of the land it will still buy you at least a one bedroomed flat) and 4% in every pound above the threshold up to £500,000. Above that limit the Government can increase the percentage to suit its political hue, but again the increase should be paid on the amount above the threshold, as with income tax. 95% of properties in England and Wales sell below half a million pounds and buyers would hardly think about stamp duty with this more progressive regime which also means that most people would be paying less. Frankly, Mr Minister, you'll find your cash cow flows more freely this way as you'll have far more transactions happening.
Yes, an accurate description of the problems resulting from the banding of Stamp Duty.
Although not acceptable in one sense, the government minister openly stating "we need the money" rather than waffling around with an alternative answer is refreshingly honest!
I can remember the threshold being £30,000 almost 30 Years ago and the same issues prevailed?
The Red Herring is the shortened description of "Stamp Duty"…. it is simply Tax, another method of gathering it… like Road Tax or Excise Duty not really having anything to do with Roads or Cars.
I can accept Tax in various forms, it's just the lack of fairness and honesty of how it is applied that I struggle with.
Simple solution. The government needs to stop paying everything they have in benefits this would allow them to stop penalising the hard working middle class who are the ones investing in our countries future not dragging it down. I do of course understand that there are genuine examples of people needing help, but who among us can honestly say that they don't know of someone who they believe is swindling the system? Its time that the people who are helping the country receive some help to do so.
Imagine income tax being charged at 20% up to £36,000 and then you get a pay rise, and the higher rate of tax increases to 40% of your whole salary? That would raise much needed revenue too. It was also lead to Civil war. Reform of SDLT is needed. The huge jumps in costs to buyers due to stamp duty thresholds is a major issue. For example a property that should be worth £260,000 will never sell for more than £250,000 as this extra £10,000 in the selling price will cost a buyer £7,800 in tax – that’s £5,300 more tax than if they paid £250k.
That means an extra £10k on the purchase prices actually costs £15,300.
Either the sale price drops, or the vendor asks a much higher figure so that the threshold is of little relevance.
These stamp duty bands create barriers and prevent a proper graduation of prices where values jump from £250k to say £280k and there is often a void in between. The answer would be to only pay the higher rate of tax on the amount above the threshold rather than the whole purchase price. In the example above, a purchase price of £260,000 would cost the buyer £2500 at the 1% duty level and an additional £300 at the 3% level making a realistic total of £2800.
I believe the Treasury would benefit as volumes would increase and the market would stabilize, free up more lending from the risk adverse, reduce down-valuations at the thresholds and level out these artificial price bands.
It would take pressure off those saving and reduce the amount they need to borrow. It would also reduce risk to lenders as buyers, especially for First Time Buyers in the South East who wouldn’t have to stretch quite as much. Even those that have enough savings, job security and income to facilitate a loan find they are exposed to near CIA like interrogation simply to get a Mortgage in Principle.
It really is about time this archaic, blunt instrument was modernised.
Mr Walker – at the risk of you demanding me to remove your name from my CV I need to challenge your reasoning on this matter. Wish me luck… Your example of the £260k sale definitely seems the order of the day, after all, £2800 equates to only two hundred quid more than would be paid if the banding did not increase. However, as you get further up the scale you would see less benefit – at £500k under the current scheme the SDLT would be a crippling £15000, whereas using your 'nEW' (does that get me back into your chuckle books? ;o) ) banding that would reduce to £10,000 – still a humungous chunk. At a cool million, the figures would be £40000 (current); £30000 (nEW)… et cetera, et cetera. Long long ago and in a place far far away (but still under Ros' watchful EYE…), during one of the what are now bi-monthly rounds of call for SDLT reform/scrappage I suggested that the playing field be levelled completely – that EVERY transaction be levied at 1% regardless of value – NO exceptions: NO thresholds: NO loopholes to climb out of… no escaping the eventuality. A fifty grand bedsit in Cr@psville would cost the buyer half a grand; a semi-detached, five million squid mansionette in leafy suburbia dents the buyer's pocket by an additional fifty large into the Government coffers. Would THIS not be a workable solution? I welcome your views. Sorry again about the keyboard. ;o)
Hey – I don't disagree with you, but the loss to the treasury would be seen as much greater and the left would accuse the real winner as being the rich. I suspect the political impact of your plan may prove a stumbling block. Whatever the solution is, it certainly isn't the existing structure. Regards EW
Thanks for the reply, Mr W. I just wonder WOULD there be a mahoosive 'drop' in revenue? We are talking about an extremely large number of properties that sell for under the current entry threshold – and of those I would guess that a sizeable chunk of them would be sales at £124999… Maybe someone should do some proper sums. If it doesn't add up at 1%, then what percentage would it take? I'd bet it wouldn't be more than 1.5% – which, in the grand scale of things might still make the world spin without the judders.