15 October 2009
Major reform called for on “Tax on Aspiration”
A property sector coalition is urging the Government to abolish in its current form the “anachronistic” Stamp Duty Land Tax, which it views as a “tax on aspiration”.
According to the “1808 Coalition”, Stamp Duty should to be reformed because its ‘slab’ structure unfairly distorts the UK’s property market.
An overwhelming majority of the UK’s estate agents (86 per cent) feel that the tax is unfair. A further 81 per cent believe that an announcement by the Government to reform Stamp Duty would have a very positive effect on the beleaguered property market.
The current Stamp Duty “holiday” for properties lower than £175.000 is due to expire but 91 per cent of estate agents surveyed feel that it should be extended.
The 1808 coalition has been formed by the NAEA and ARLA to address the issue of “modernising” Stamp Duty in the run-up to the Pre-Budget Report. It is named after the year the duty was first introduced on UK property sales, and highlights its position as a “relic” of another age that fails to recognise the modern British property market.
Peter Bolton-King, Chief Executive of the NAEA, said: “Stamp Duty is a barrier to entry for many first time buyers and is also prohibitive for those looking for a step up the property ladder. In addition, it unfairly penalises those investing in buy-to-let portfolios, who have to pay Stamp Duty on the bulk price when individual buy-to-let investors pay a lower rate on the individual unit price.
The time has come to re-assess Britain’s most unpopular tax, which is a levy on those aspiring to own their own homes and is manifestly perceived by all those who pay it as being unfair and punitive.”
Stamp Duty was introduced for property sales in 1808 and has gone through a number of changes since then, most recently with the addition of next bands in 1997. As house prices have risen, Stamp Duty has become increasingly outdated, as the thresholds have not been raised in line with property prices.
Peter Bolton-King explained: “Stamp Duty has failed to evolve and is an unwelcome burden for anyone seeking to buy a new home. As lenders demand even greater deposits, buyers are going to struggle to stump up the huge capital outlay that Stamp Duty demands. Now is the perfect time to seek change and produce a fairer tax that recognises the challenges that modern house buyers face.”
The tax yield from residential Stamp Duty has grown ten-fold since 1996/97. Between 1997 and 2008 receipts from Stamp Duty grew from £675 million per annum to £6.68 billion. The current system makes it difficult for the Government to project its own revenue streams due to the volatility of Stamp Duty returns during the boom/bust cycle.
Government statistics also highlight the geographical inequalities of Stamp Duty:
- London reports 11.5 per cent of the UK’s residential property transactions, yet 29.4 per cent of Stamp Duty yield.
- Conversely the East Midlands has 7.3 per cent of transactions, yet only 3.6 per cent of Stamp Duty yield.
Editor Notes
About The 1808 Coalition:
The 1808 coalition campaign to reform Stamp Duty is named after the year Stamp Duty was first extended to property sales in Great Britain. According to The 1808 coalition, the Government should abolish Stamp Duty outright, or implement one of the alternatives:
• Suspending Stamp Duty for the duration of the housing downturn, with a commitment to review the existing system
• Reforming the system moving from the distorting ‘slab’ system to a more progressive ‘slice’ system or progressive system which, like other taxes, is index-linked to inflation
• Raising the starting threshold for this tax well above the current £175,000 limit to ensure that as much is done as possible to assist first time buyers into the market.
