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

JimmyTheWig

Martin, you asked for our thoughts.
We're in to the 4th page.
Have you read them? What do you think?

spooky69

Out of curiosity, why do we need to pay a tax for putting a roof over our heads?

I also don't see why a fixed percentage cannot apply - more expensive houses incur a higher payment anyway - making a higher rate for 'richer' people simply encourages those people to try and avoid paying such rates.

JimmyTheWig

jb88 wrote: »

There seems to be a decent answer on homesknowhow.co.uk site in the blog section (can't yet post links!) with all 3 of the rules met (Simple, Fair, Revenue Neutral)

"Seems to be"? A strange comment to make about something you wrote yourself, James!
It's an interesting submission, though.

However, I don't understand the graph in the blog entry. I don't understand why the "Old" line doesn't have jumps/gaps in it.

buglawton

In The Times this morning - Scottish parliament is officially considering a fairer alternative.

JimmyTheWig

Yes, I guessed that's what you'd done after I posted. A bit like hospital temperature charts.

sghughes42

JimmyTheWig wrote: »

I think you've missed grey gym sock's point.

Lets say for a given house, market forces dictate that it will sell for £150,000. The seller gets £150,000 and the buyer pays £151,500 (i.e. including tax). The seller isn't prepared to sell for £148,500 and the buyer is happy to pay more than £150,000. If that wasn't the case, the current selling price would go down.

The rules change as to who pays the tax.
If the house stays at £150,000 then the seller will get £148,500 and the buyer will pay £150,000.
But we've just said that the seller wants more than that and the buyer is prepared to pay more than that.
So market forces mean that the price will go up to £151,500.
The buyer pays £151,000 and the seller gets around £150,000.

Nothing really has changed.

Used in isolation that argument may sound good. However, if you look at a bigger picture it could be argued that market forces could keep prices down.

How about Person A wants to buy a house with a budget of £150000. Person B wants to sell a house at £150000 and buy a house at £250000.

Under the current system, Person A would pay £1500 stamp duty on their purchase and Person B would pay £2500 stamp duty on their purchase.

Now, Person A who is trying to get on to the property ladder will have a harder job affording the £1500 than Person B who already has a house but wants to move up.

Under my proposed system, Person A would pay no stamp duty and Person B would only pay £1500 on the sale of their house.

Of course, the person who Person B buys off would then pay the £2500 duty but again, they are someone starting from a base of having a house rather than trying to get on the property ladder and also would end up paying less duty on the sale than they would have paid on the purchase of a more expensive house.

Why would Person B put off potential buyers by putting their price up when they are ineffect paying £1000 less anyway on their move?

The only people who would be tempted to bump their prices are the ones downsizing and surely the market forces would work against them to keep their prices down to compete against people upsizing.

My proposal wasn't intended to change the overall situation, it was just intended to push the tax burden up the tree away from first time buyers.

JimmyTheWig

sghughes42 wrote: »

Why would Person B put off potential buyers by putting their price up when they are ineffect paying £1000 less anyway on their move?

(a) They aren't paying £1000 less on their move because their vendors upped their selling price due to having to pay stamp duty.
(b) Because the buyers would be prepared to pay extra because they don't have to pay stamp duty.

JimmyTheWig

Any thoughts on these comments you asked for, @MSE Martin?

twlldyn

The government should introduce a graph with house price on the horizontal axis and stamp duty on the vertical axis. The graph line would probably be curved upwards like a banana to accommodate gradually higher taxes for dearer properties and the graph need not start from the origin.It could start from for example £60000 therefore no tax paid for anything below £60000 but the tax rises gradually as the property price increases.A lot fairer way to implement this tax.
Buy house for £249999 pay £2500 tax
Buy house for £250001 pay £7500 tax.
This distorts the real value of houses above £250000.

JimmyTheWig

twlldyn wrote: »

The government should introduce a graph with house price on the horizontal axis and stamp duty on the vertical axis. The graph line would probably be curved upwards like,a banana to accommodate gradually higher taxes for dearer properties andmthemgraph need not,start,from,the origin.It could start from for example £60000 .thereforeno tax paid for anything below £60000 but the tax rises gradually as the property price increases.A lot fairer way to implement this tax

Would be tricky for anyone to know how much they were going to pay, though, without looking at the graph.
It's the right idea in principle, though.