Lords weigh in on scrapping Stamp Duty for downsizers
Report, sponsored by Lords Mandelson and Heseltine, says older downsizers should be exempt from Stamp Duty – but second homeowners should be financially penalised.
Stamp Duty payments for elderly buyers looking to downsize should be scrapped in a bid to ease the housing crisis while those who own a second home should be financially penalised, a new report commissioned by the Family Building Society suggests.
The report, from the London School of Economics and University of Sheffield and sponsored by Lord Mandelson and Lord Heseltine, argues that older residents are often less likely to downsize due to a lack of financial incentives spurred on by high moving costs and the payment of Stamp Duty on their new home.
CURRENT DEMAND
According to the report, the UK’s housing shortage cannot be dealt with simply by building more homes, detailing that current housebuilding targets will struggle to absorb the current demand alongside the predicted increase of 1.6 million households forecasted over the next 10 years.
Stamp duty is charged at 5% between £250,001 and £925,000, starts at £425,000 for first-time buyers, and rises to 12% for properties exceeding £1.5million.
Lord Mandelson, former first secretary of state, says in the report: “Stamp Duty Land Tax can be changed easily and its impact, as seen during the pandemic holiday, can be enormously beneficial in overall economic terms. It just requires a little creative thinking from the Treasury.”
REFORMING STAMP DUTY
But David Hannah, Group Chairman of Cornerstone Tax, says policymakers ought to be focusing on reforming Stamp Duty at the ‘lower end’ of the housing market, encouraging market activity amongst those taking their first steps on the property ladder.
He says: “SDLT payment bands have been long overdue for an overhaul as they have never been index-linked to house price inflation. An increase to these thresholds would stimulate activity at the lower end of the property market and allow first-time buyers to reduce the amount they need to borrow, thus improving their affordability calculations.”
He adds: “As we all know, a rising tide lifts all boats, those looking to purchase properties on the mid-to-high end of the property market will now have a chance to sell their low-end properties as a result of the increase in demand from prospective buyers, contributing to further momentum within the housing market.”
