Stamp Duty – why so many think it’s unfair
If you want to raise the blood pressure of a London estate agent (and a London house buyer) just mention two words: Stamp Duty, writes Graham Norwood.
It’s an issue of huge importance to the capital’s housing market because of growing evidence that stamp duty is deterring buyers.
In the year to July 2017 the government received £12.4 billion in stamp duty – a £2 billion increase from the year ending July 2015. Some of that increase is down to rising house prices but most is down to soaring stamp duty: there are fewer buyers but, in London, the total stamp duty being paid is higher than before.
That may be good news for the Treasury’s coffers but it represents a headache for buyers and sellers. And this is why…
When the current system of stamp duty began in the Fifties, it was simple and low: you paid nothing at all on a home up to £30,000 and then one percent above that threshold. The average-priced home was only £20,000 so relatively few paid any stamp duty at all.
In 1993 the threshold was doubled to £60,000 but more complicated and costly changes began just before the Millennium. By the year 2000 there had been a series of increases, there were four rates instead of two, and the highest became a record four percent.
In the past 15 years the duty has become a highly controversial tax, changing frequently and seen as a huge revenue source for Labour and Conservative governments alike.
So in 2012 a new seven percent rate was introduced for homes priced £2m or more; by late 2014 that had risen, yet again, to 12 percent for homes over £1.5m. Hitting London in particular, stamp duty on homes over £937,000 became a hefty ten percent.
For people buying an additional home – a city pad, holiday home or buy-to-let investment – the maximum stamp duty is now 15 percent because of a surcharge introduced in 2016.
So what was, two generations ago, a tiny sum that people factored in to their purchase cost, it’s possible now to pay £150,000 stamp duty on a home costing £1m – and that is a very typical price for many properties especially in central London.
People do, of course, still buy in great numbers.
London’s attractions – safety and education, culture and connectivity – mean people still want to live in the world’s most exciting city.
However, just think how attractive it would be if buying was not so expensive: property professionals are urging the government to rethink. Will it happen? Watch this space.
“Just think how attractive it would be if buying was not so expensive”