Stamp Duty as seller’s tax will help anyone looking to move up the property ladder
There is a more ambitious reform to Stamp Duty that can be made fairer for all involved, writes Conservative MP John Stevenson.
Ahead of divorce or even bankruptcy, buying and selling a house constantly ranks highest on lists of the most stressful experiences in modern life. Yet it something that we all aspire to – and we have the same hope for our children. This is why the Chancellor’s announcement in the last Budget that first-time buyers will not pay any Stamp Duty on properties up to the value of £300,000 came as a pleasant surprise to many.
With the relief for properties up to the value of £500,000 it means that Stamp Duty will be cut for 95 per cent of first-time buyers, and 80 per cent will be taken out of the tax completely.
But despite this welcome development I still think there is a case to look at reforming Stamp Duty completely – specifically, to make the tax one that is paid by the seller of a property rather than the buyer.
The key effect of this change will be that buyers will no longer have to find an additional lump sum to pay on top of their deposit. Instead the obligation to pay will be on the seller – who generally will have capital from the sale of their property. The fact is that sellers are generally in a better position to pay.
I believe Stamp Duty as seller’s tax will help not just all first-time buyers, but anyone looking to move up the property ladder. As families grow households look to find larger properties. At the moment they are hindered by being presented with a large bill for doing so. If the seller is obliged to pay the tax, yes it is likely to be reflected to some degree in the final price of the property, but that increase will be absorbed by the buyer’s mortgage agreement – making a one off lump charge a more manageable monthly payment. Those downsizing to a smaller home will have the excess funds to pay the tax off.
The Chancellor’s generous offer for first-time buyers helps address the issue of affordability – though only for first-time buyers. But the issue of affordability is a symptom of the real problem with our housing market, which is a lack of adequate supply. Making Stamp Duty a seller’s tax will make it marginally cheaper to move up the chain, which would in theory open up the housing market more. Indeed, “second-steppers” pay an average of £8,000 in Stamp Duty (£23,000 in London).
Furthermore, the Chancellor’s decision is not tax neutral. It is going to cost this country £670m by 2022-23. This is money that could be going into funding an expansion of the house-building programme – paying for the necessary associated infrastructure. Reversing the obligation raises these funds whilst ensuring that no first-time buyers pay the tax at all.
The Chancellor’s decision was radical in scope – and I absolutely support the measure as a way to help first-time buyers. But I do think there is an even more ambitious reform to Stamp Duty that can be made fairer, easier, and less stressful for all involved.
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