A radical proposal to to make Stamp Duty fairer- it could work!
There has been yet another new proposal from within the estate agency profession to change the way stamp duty is charged which is fairer to the consumer and will help to get the current log jam of housing supply unblocked.
Under the radical proposal, each seller will be able to deduct the value of stamp duty paid by their buyer from the stamp duty they pay on their next home.
One of the major barriers to moving is the high cost of stamp duty which prevents many second steppers moving up the housing ladder. This would make it easier for young families to move up, freeing up houses for first time buyers. It would also provide an incentive for older homeowners to downsize (incurring no tax) improving the supply of larger family houses.
While the Treasury would lose a proportion of the £6.9 billion it raises in stamp duty this would be partially recouped by a rise in the number of transactions, increasing VAT collected from increased purchases of white goods, fixtures and fittings and professional services. There would also be wider economic benefits, for example in improved labour and mobility.
Advantages of stamp duty tax credit.
-Aids second steppers struggling to afford a larger home for their growing family by reducing their stamp duty bill.
-Downsizers buying a cheaper property than the one they currently own will have their stamp duty fully negated by the credit from their buyer’s stamp duty. This will encourage downsizing and free up larger properties for families who need to upsize.
-While first time buyers will continue to pay stamp duty, their first property will provide a future stamp duty credit when they decide to move on and sell.
-Stamp duty would be transformed from a transaction tax, which most economists agree creates economic inefficiency by stifling natural market turnover, into a tax on the incremental value buyers outlay when moving from one property to another.
We doubt Mr Osborne or HMRC will be persuaded, but there is no doubt something should be done about the current thresholds which make this a grossly unfair tax. May be at the next budget!