Stamp Duty – can you fix Britain’s worst tax?

tgroom57

I like it the way it is. Probably because I am in a sub-£125K house and have no intention of moving. When I sell, there is no danger my buyer will have to pay tax: but if it is a landlord who buys I may well up the price so he does.

I like that the tax is a disincentive to keep moving house, and I was going to argue it is a brake on prices- but it hasn't prevented the house market rocketing by 150% in the past 20 years.

Old_Git

how about the seller pays the stamp duty not the buyer .
That way first time buyers dont pay

JimmyTheWig

wozearly wrote: »

One alternative would be to shunt the whole scale along so that the 0% band starts further up than in your original suggestion, but where stamp duty escalates faster (as a hypothetical example, a 0% band up to £150,000 followed by a 2% band would lead to a £250,000 having a new stamp duty of £2,000 rather than the £2,500 it currently has. £250,001 would also have a stamp duty of £2,000, rather than the £7,500 on the current model).

The overall change could be made revenue neutral either by thumping much higher increases on comparatively larger properties, or by not "giving away" too much at the lower ends compared to the current model, or a mix of the two.

One of Martin's conditions was that "It’s fair and roughly proportionate. While by definition some will need to pay more and some less – overall the burden should be of a similar level to the way it works now". I don't think reducing the tax on lower price properties and increasing it on higher priced properties fits this criteria.

[Personally, I'm all in favour of such a shift in taxation, but that's not the point here.]

jamesd

One approach to reducing the pain may be to spread the payments out over five years. Easier to get regular income than a lump sum.

N1AK

oldvicar wrote: »

Scrap SDLT altogether, and replace it with an annual tax of e.g. 0.2% of the price the property was last bought/sold for. Have it collected locally with council tax.

It's an interesting idea, although as you point out it disadvantages people who need to move. I'm not sure why that is a selling point. Someone who bought a house worth £7k 20 years ago would be paying £14pa if they needed to move to avoid unemployment (for example) to a similar property, worth around £180,000 today, it becomes £360.

It also encourages older people to stay in large properties rather than downsize to somewhere more manageable. This could be worse for them and leaves less family sized property for people with families.

I'd much rather see stamp duty dropped and council tax increased to account for the revenue.

samizdat

N1AK wrote: »

I'd much rather see stamp duty dropped and council tax increased to account for the revenue.

Agreed.

SDLT or Stamp Duty is a tax on moving house, and it doesn't really make any sense to tax this. People sometimes need to move, to find work or because they have had children, for example, and this is a difficult enough process without slapping a tax penalty on top. The property market is inherently illiquid, and nothing should be done that diminshes liquidity still further, yet this is the effect of SDLT.

There should just be an annual user tax on property based on its assessed rental value. To minimise administrative costs, these valuations should probably just be done every ten years or so, or perhaps an assessment could be done based on actual rental data of similar properties (size, area etc.).

JimmyTheWig

samizdat wrote: »

Agreed.

SDLT or Stamp Duty is a tax on moving house
...
There should just be an annual user tax on property based on its assessed rental value.

I don't disagree.
However, that's not what this discussion was supposed to be about.


@MSE Martin, what do you think of the suggestions so far?

buglawton

Tax on moving, that's what it is. More's the pity that the taxpayer does not give whichever govt supports current stamp duty regime a good slap at the next election. Some journalists are speculating why the big main parites get trounced at by-elections - I think it's issues like htis that are the reason.

grey_gym_sock

one good thing about stamp duty IMO is that it's a progressive tax: i.e. the percentage due is higher for more expensive houses. (unlike e.g. council tax, which is regressive: a more valuable house pays more in GBP, but a lower proportion. e.g. if one house is valued at twice another, it pays more council tax (unless they're both in the top band), but less than twice whtat the cheaper house pays.)

the bad things about stamp duty include, as has been said: (a) it's a tax on moving; (b) the cliff-edge increases when a house price goes over a threshold.

my answer to the original question, viz. how to fix (b), by charging marginal rates, and attempting to be revenue-neutral, is:

£0 - £125,000: Nil
£125,000 - £250,000: 3%
£250,000 - £2,000,000: 6%
£2,000,000 and above: 8%

this is quite similar to thelawnet's answer: http://forums.moneysavingexpert.com/showpost.php?p=51959829&postcount=17

also worth comparing with JimmyTheWig's answer:http://forums.moneysavingexpert.com/showpost.php?p=52068925&postcount=3

my answer has the advantage of keeping the same £125,000 exempt amount.

it charges less on houses between £125,000 and £187,500, but (attempting to make up that lost revenue) more on houses between £187,500 and £250,000.

similarly, it charges less on houses between £250,000 and £375,000, but more on houses between £375,000 and £500,00.

and so on.

so there is a fairly even spread of winners and losers as you go up the price scale.

i don't know if it's actually revenue-neutral. wozearly tried (see earlier in the thread) testing JimmyTheWig's proposal in a spreadsheet using land registry statistics. but the land registry now has full data for march available for full download, so we could test for revenue-neutrality more accurately using this.

(note: the land reg price file gives dates for each house sale, mostly within the last few months, but a few strays from the 1990s. i wonder why. perhaps we should ignore some of the older prices.)

buglawton

Apparently, new wheezes are already in motion to avoid top end Stamp Duty - people take a long lease instead, with a built in auto renew clause, while the owner stays the same. In other words, a shift towards long term renting with built-in tenure security of the sort that ordinary folks can't afford.

Rich root out stamp duty loopholes | Nicosia Business Review

No surprise really. A loophole industry (which in the end will just come down to a behaviour change) is a signal, that a tax is basically perverse to begin with.