50% of Homebuyers hit by punitive levels of stamp duty
We make no apology for talking about stamp duty again because of the difficulties it creates in the property market at certain levels. By 2018 more than 281,590 homes will be subject to levies of at least £7,500 as the property recovers, up from 183,000 last year.
The report by the Taxpayers Alliance, based on professional forecasts concluded that four in ten homes will be subject to stamp duty at 3 per cent or more. The reports led to warning ordinary families will be put off moving house because of the cost of stamp duty on the purchase of their next home. Experts also suggested first –time buyers may be deterred from making their first step on the property ladder. John Redwood, the conservative MP for Wokingham, is calling for the Treasury to reform stamp duty so that it does not apply to the entire purchase cost of the house.
He said “It leads to a massive distortion. It is creating zombie areas in the property market where people wont undertake transactions a few tens of thousands over the threshold because there’s such a huge tax hit if you do that.” The report found three in five homes in the South East and one in six homes in Wales will be subject to stamp duty rates of 3% or higher by 2018. Outside of London four in ten homes in the East of England and the South West will be subject to the higher rate.
Homes worth less than £125,000 are not subject to stamp duty, but those worth up to £250,000 are taxed at 1 per cent. Rising house prices will mean that more purchasers face paying at the higher rates of 3 per cent applied to homes worth over £250,000 to £500,000, and 4 per cent to homes valued between £500,000 to £1million. Those worth more than £1million are subject to stamp duty at 7 per cent.
The findings come as the housing market is showing signs of recover, encouraged by government schemes such as Help to Buy, which have made it easier to get a mortgage.
Matthew Sinclair, chief executive of the Taxpayers Alliance said: “As the property market recovers, more and more people will be sucked into paying punitive rates of stamp duty and it will be more expensive to move than ever. “High stamp duty rates stop young people buying a home and starting a family, discourage elderly people from downsizing and make it harder to move to a new place for a new job. The Government urgently needs to cut stamp duty an ease the burden before the situation gets even worse.”
A treasury spokeman said: “At a time when we are focused on reducing the deficit, cutting stamp duty land taxes would create a significant cost to the Exchequer and this would have to be met through increasing other taxes. We believe there are other more effective ways to support the housing market, such as improving access to finance.”
We think the £250,000 threshold should be raised to at least £300,000.