The existing Stamp Duty system needs a shakeup, it is an archaic system that is hindering the housing market across the country. Surveyors, estate agents, buyers and sellers are all singing off the same song sheet … the government needs to be convinced as it is yet to act.
With the current system a purchaser is taxed a percentage of the purchase price according to the following price brackets:
Stamp Duty bands
|Purchase Price||Stamp Duty %|
|Up to £125,000||0%|
|From £125,001 to £250,000||1%|
|From £250,001 to £500,000||3%|
|From £500,001 to £1,000,000||4%|
|From £1,000,001 to £2,000,000||5%|
The problem with this system is that a buyer purchasing a residential house for under £250,000 would have to pay 1% of the price in tax, whereas someone buying a home for £250,001 would have a tax bill of 3%. There is a campaign group, Stamp Duty Reform UK, which is focused on encouraging the Government to change its policy on Stamp Duty; see http://stampdutyreform.org.uk/
A table on this group’s website indicates how bizarre this system is:
Stamp Duty payable
|Purchase Price||Stamp Duty Payable|
With the current stamp duty system potential purchasers see the Stamp Duty payable leap by an extra £5,000 if they cross the £250,000 level by just £1, or by a staggering £10,000 if they cross the £1million level by £1. As a result many buyers are financially unable to venture marginally above any threshold and it makes the cost of moving to a level that many can’t afford; on the other side of the coin vendors may have to price their home just below what they may otherwise wish, or need, to achieve from a sale.
A much fairer system would be to only tax the portion of an agreed purchase price over the threshold (as with income tax). Stamp duty thresholds become barriers in the market with both buyers and sellers and a system more like the income tax system would mean that these barriers would disappear.Posted on Saturday, 24th May, 2014