Stamp duty threshold seen as unfair and counter productive

There is a call for a new 2% tier of Stamp Duty to be introduced to cut taxes for purchasers of properties between £250,000 and £375,000.

Currently Stamp Duty Land Tax triples from 1% to 3% at purchases of £250,000.

New calculations say that more than a quarter of home buyers are now paying Stamp Duty Land Tax at the higher rates of 3% - selling out at least £7,500.

The research, by the Tax Payers’ Alliance is underpinning the pressure groups new Stamp out Stamp Duty campaign.  It estimates that the tax raised £4bn for the Treasury in 20012/2013 most of which was collected at rates of 3% or more.

Using a mixture of Land Registry and HMRC data, the research says that in England and Wales some 723,839 homes were bought in 2013/13, with 182,692 purchasers being liable for Stamp Duty at 3% or more.

Stamp Duty rates of 3% or more were imposed on 65% of all residential transactions in London, 39% in the rest of the south-east, 27% in the east of England, 24% in the south-west, 12% in the midlands and 10% in the east Midlands, according to the research.

The Taxpayers’ Alliance Chief Executive Matthew Sinclair described it as both the largest single tax bill most people would ever face and also the easiest one for legal tax avoidance; “You simple don’t move house” he pointed out.

Chartered accountants Blick Rothenberg estimate, based on HMRC transaction figures that the Treasury is coining in an average of £600m per month in Stamp Duty.  Frank Nash, a tax payer at the form said “Stamp Duty Land Tax now contributes more than capital gains tax and inheritance tax combined, and clearly demonstrates how important this tax is to the public finances.”

There is now an argument for a new tier to be introduced.  A further tier of 2% between £250,000 and £375,000 could substantially increase the number of transactions as buyers are encouraged by the tax savings.  This would be consistent with the other 1% stamp duty increments below £1m and remove the anomaly of the biggest hump being at the bottom of the property scale where it triples from 1% to 3% at £250,000.

Thousands of buyers could benefit from these cost savings if they were implemented.  The government would see further economic benefits with an increase in levels of property related business and subsequent tax revenue collection, including Stamp Duty revenues from further up the property chain which would offset any subsequent shortfall in revenue in the lower band.

Currently a purchase price of £250,000 has SDLT at 1% (£2,500) and £290,000 at 3% (£8,700) which is plainly wrong. A 2% threshold on purchase price of £290,000 equals £5,800 saving nearly £3,000, but will the Government listen?