Treasury ‘looking at property tax to replace Stamp Duty’
Rachel Reeves, strapped for cash, has turned her attention to private housing and is modelling a tax on property sales.
Stamp Duty may be scrapped and replaced with a new form of property tax, according to a report in The Guardian.
The newspaper claims senior ministers have briefed officials to study and model an alternative “proportional” property tax.
Officials are examining a potential national property tax that would replace Stamp Duty on owner-occupied homes. They are also considering a local property tax to replace council tax in the medium term in an effort to repair waning local authority finances.
It also claimed that no final decisions has been made but speculates the new national tax replacing Stamp Duty, could be implemented during this parliament.
Rachel Reeves is looking to boost coffers by tapping into the ‘unearned’ capital appreciation of the private housing stock.
The national tax would be paid by owner-occupiers on houses worth more than £500,000 when they sell their home.”
The report goes on to say that “the national tax would be paid by owner-occupiers on houses worth more than £500,000 when they sell their home. The amount paid would be determined by the value of the property, with the rate set by central government, which would directly collect the proceeds via HM Revenue and Customs. It would not replace stamp duty on second homes.”
A spokesperson from HM Treasury has said: “As set out in the Plan for Change, the best way to strengthen public finances is by growing the economy – which is our focus.
“Changes to tax and spend policy are not the only ways of doing this, as seen with our planning reforms, which are expected to grow the economy by £6.8bn and cut borrowing by £3.4bn.
“We are committed to keeping taxes for working people as low as possible, which is why at last Autumn’s Budget, we protected working people’s payslips and kept our promise not to raise the basic, higher or additional rates of income tax, employee National Insurance, or VAT.”
Industry reaction
Paula Higggins of HomeOwners Alliance
“Stamp Duty is unfair, outdated and stalls the housing market.
“Our research shows that nearly half of homeowners considering a move say Stamp Duty puts them off, and it particularly penalises growing families and downsizers. Tinkering won’t fix it. The only solution is to scrap Stamp Duty completely.
“On the suggestion of introducing a new property tax there shouldn’t be a money grab by treasury at the expense of homeowners. It’s an attack on homeowners and history shows that introducing a new tax is never followed by the removal of older taxes.
“In the interim the government needs to tread carefully. Uncertainty around property taxes causes paralysis in the housing market. We’ve just seen how damaging this uncertainty can be: in April this year, when Stamp Duty thresholds changed, transactions collapsed by 64% in a single month – the sharpest fall on record. Homeowners can’t afford a repeat.”
Simon Gerrard, Chairman of Martyn Gerrard Estate Agents
“The existing Stamp Duty regime is unfit for purpose and has had a chilling effect on the housing market, which is why I’ve long campaigned to reform it.
“It’s good to see that the Government has understood some of the issues and is taking action to end the broken system. Adding further costs to purchasing a home has only reduced transactions, stifled upward mobility and prevented the efficient functioning of the housing market.
“This new tax would be paid by the seller, rather than the buyer which means that it won’t be the same tax on aspiration that Stamp Duty currently is.
“However, it’s clear that the Government is motivated by a desire to raise revenues and I’m concerned that this new tax is going to be punishingly high. If that’s the case, you’re going to see a ceiling at the £500K threshold for that band of the market, as people avoid falling under the regime, and then a significant jump in values with nothing in between.
“Prices above £500K will skyrocket as sellers account for the losses caused by the tax, that used to be paid by the buyer.
“What most worries me is the effect on families in London. The housing market is far higher in London, which means any family home will be impacted by this new tax. If prices surge higher because of this new regime, how will anyone in the capital start a family?
“The Government needs to think very carefully what the wider repercussions these changes might have and act carefully. So far many of its attempts at raising revenues through tax, such as the Stamp Duty changes earlier this year, have backfired.”
This is a another example of how this incompetent Labour government plans to ‘smash’n grab and take the economy down once again.
So people who have already paid stamp duty on buying are going to be taxed again when they sell, even if they do not intend to buy again and so “save” on stamp duty. This is yet another kick in the head for retirees – and another disincentive to downsize – and for existing landlords, who have not only paid inflated stamp duty, but now face sales tax and capital gains tax on exit.
Why don’t they just abolish tax-free capital gains on Principal Private Residences as well and return to Schedule A imputed rent calculations as well? It’s about time unearned gains and the concept of the housing ladder are abolished: the country can’t afford it any longer with booming uptake of social security, an ageing population, unaffordable state pensions and social care bills, and 100% of GDP in national debt to pay down.
The treasury do not understand what motivates landlords and seams to forget the treasury receives 20% of profits. Stamp duty land tax which was 3% and now is 5% and high interest rates stops many people with money from borrowing to invest. Plus when they do the up front costs mean no profits for several years and therefore no flow of money to the treasury. Many landlords are using the capital growth to build their wealth and can do without income but the government can’t do without tax revenue.
The golden goose is not dead but like all egg laying birds it’s not laying any time soon.
So the Chancellor is considering scrapping Stamp Duty and replacing it with a Sales Tax. Of course, this will be promoted as a long overdue “reform” to the outdated stamp duty and as expected some “property experts” will rush to praise this so called reform.
So let’s get this straight.
This is not a reform, this is a HUGE TAX GRAB being planned by a desperate cash strapped Chancellor whose record so far is that every so called attempt to raise taxes has achieved the exact opposite.- Look at the effect on the economy of her disastrous “Jobs tax”?
Dear Rachel from Accounts, our wannabe economist Chancellor has not yet even learned the first rule of economics.
Beware of unintended consequences.
1. Raise money by increasing National Insurance for employers aka Jobs tax..
2. Employers reduce workforce to pay the increased tax.
3.Unemployment rises
4. Government has to pay more out as benefits to the unemployed as more claimants sign on
5. Government receives less tax than before!
6. The unemployed have little money to spend and those in employment who have been bought into the N.I. net now also have less to spend. VAT income falls economy enters recession etc etc
Of course Rachel from complaints will mask her desperate tax grab as a reform and a way of making it easier for new homebuyers to enter the housing market.
Wrong again!
Next Rule of economics.
Increase demand for homes by making it easier for buyers to buy without increasing supply, means only one thing, INCREASING PROPERTY PRICES.
So sellers, the very people who Rachel wants to hit, gain from the rise in the value of their property whilst buyers suddenly find that any money they might have saved from not paying stamp duty has been far exceeded by the increased price of the property they were hoping to buy!
We wont even go into the fact that the huge numbers of people coming into the country is already putting massive strains on a property market where overall new builds are still sluggish and you have a recipe for chaos and disaster.
But riding to the rescue will be “Party Girl Rayner” and all will be well because she will build millions of new homes!!
Welcome to Rachel’s brave new world of Cloud Cuckoo Land
Matthew Pennycook is the housing minister and also the MP for Greenwich, London. Even a modest two bed ex-local authority terraced house is knocking in the door of £500k here. A reasonable ‘family home’ as the average person might term one is £900k plus. A 70sq m terraced cottage starts around £600k. While £500k may be nearer the top end of prices in a lot of the country but it is the entry level for a fairly, dated property in London areas. It will be interesting to see if MP has any understanding or support for his own constituency which would be hit hard by such a low threshold.