Calls are mounting for a change to stamp duty in tomorrow’s Budget to help keep the housing market recovery on track.
Chancellor Rishi Sunak is under pressure to change the current structure, which penalises high-value properties and buy-to-let investors.
Newly elected Conservative MP for Stoke Jonathan Gullis says the present system reduces property values and discourages investment.
“People are not moving house as often and the older generation are not inclined to downsize because of the hefty stamp duty bills they are likely to face,” he wrote in his Times column.
“Its abolition would enable people to move more freely, improving social mobility as people are able to seek out better paid work, and allow the housing market to start moving again.”
Meanwhile the influential Centre for Policy Studies has released a new report which makes the case for the so-called ‘dynamic’ effects of tax cuts.
The CPS claims that reducing stamp duty would incentivise people to move home more often, and increase the number of properties sold overall – compensating for reductions in revenue.
“This is without considering the havoc that Stamp Duty Land Tax is wreaking on the housing market, especially in those areas where mobility is most economically and socially vital,” says the report, Tax Cuts Don’t Have to Be Taxing.
A deeply pernicious tax that significantly raises the cost of moving house, and therefore causes people to remain in homes that are ill-suited to their needs.” Centre for Policy Studies.
The study describes stamp duty as “a deeply pernicious tax that significantly raises the cost of moving house, and therefore causes people to remain in homes that are ill-suited to their needs”.
In 2005, the median amount paid in stamp duty was £1,585 for England and £2,324 for London. Now an average house buyer in England can expect to pay £2,400 – in London, the figure is £13,500.
The thinktank’s research suggests that a major tax cut to exclude 90% of homes from stamp duty completely could provide a saving of at least £15,000 for most homebuyers.
It also claims that cutting or abolishing stamp duty would boost housing market transactions and promote house-building. In turn, this would reduce the need for affordable housing grants and generate additional revenue.
The report says that when these ‘dynamic’ effects are accounted for, the cost of abolishing stamp duty on primary residences falls to £3.3bn.
It proposes a significantly reformed stamp duty, charged at 0% on properties up to £500,000 in value, 4% up to £1m, and 5% beyond that – a move that would cost the Chancellor £1.6bn.
Stamp duty was last reformed in 2017 when first-time buyers were exempted from paying any tax on properties worth less than £300,000.