Mark Manning on ‘Time to Reform Stamp Duty’

Stamp Duty is an old fashioned, complicated tax that restricts movement in the property market and generates minimum revenue for the Government and in some opinions, is no longer fit for purpose.

The current Stamp Duty holiday for properties up to £500k has demonstrated that when the tax is removed, the housing market absolutely flies, even when being in the depths of a pandemic. It really is a welcoming boost for the market.

As the Stamp Duty holiday end looms, now is the perfect time for the Government to look into permanently abolishing it and instead potentially introduce alternative ways to tax people more proportionately to their individual wealth and current market conditions.

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The Problems with Stamp Duty

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At present, everyone pays the same amount of Stamp Duty based on a property’s value, no matter what your financial circumstances are, and this means that it’s highly prohibitive for many people. It stops people moving up the chain, but also stops older generations from downsizing and moving down the chain.

This means there are lots of older people living in large family homes with more space than they need because they don’t want to get stung with a huge Stamp Duty bill to move to a smaller, lower value property. It also means that for growing families it is hard to move up the chain because of a shortage of larger properties coming onto the market, as well as huge Stamp Duty cost associated with trading up.

Essentially, the tax stifles movement in the market, whilst making home ownership unobtainable for many.

Some feel if the Government were to permanently remove the tax, there would be a surge in sought after properties, that would create huge amounts of equity, enhancing the economy too. This would stimulate the market activity across the board, as more people would move up and down the property chain into properties that are right for their circumstances. Getting rid of the tax would also make it easier for first time buyers to step onto the property ladder, as more first-time homes become available as people move through the chain.

Over the past 10 years, the value of properties has increased massively, but the Stamp Duty thresholds haven’t risen anywhere near in line with them. This means that many people are paying Stamp Duty that wouldn’t have paid it in the past. It’s no longer just a tax on the wealthy.


Two people put jigsaw pieces together

Recently, there’s been a lot of talk amongst market experts about completely abolishing Stamp Duty and council tax, and instead introduce a new tax that reflects the current value of people’s properties. Many experts believe that this would be a viable, positive solutions if it’s executed correctly at the right rate.

Some believe that council tax could be more outdated than Stamp Duty, 30 years to be precise! It’s based on property values in 1991, so it is seen to be in need of a reform to align it with current property values.

By combining the two taxes and reworking how they’re calculated based on people’s current circumstances and property values, could potentially make the whole process fairer.

Alternatively, introducing a sales tax could be a great option as the person selling their home pays a tax on its current value, rather than a tax value of the home being purchased. However, this could potentially discourage downsizers to move and also inflate market values as vendors may try to sell their homes at a higher price to cover the cost.

With many ideas and solutions flying around the market, our favourite is for the Government to abolish Stamp Duty properties up to £500k, to ensure huge numbers of buyers no longer have to pay the tax. Then it could be looked at every 2-3 years assessing the limit based on house price movement over that period.

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