Over the past 2 weeks there has been significant commentary regarding stamp duty and whether it could be temporarily suspended to eject some much needed momentum in to the beleaguered housing market.
The source of the rumours that possible changes were being considered is a moot point. The Treasury and Number 10 seem to be at odds over policy changes and who said what.
Rather than boost the market the confusion has backfired and stalled the market even further. The National Association of Estate Agents recent poll found that 24% of more than 1,000 of its members felt that house sales had fallen through as a result of the current confusion. Buyers have either pulled out of sales or are negotiating further discounts on already reduced purchase prices.
As a result property chains across the UK are breaking. How much is stamp duty and who pays it?
- 1% for properties between £125,000 and £250,000
- 3% on properties over £250,000
- 4% on properties worth more than £500,000
- The buyer pays stamp duty on completion of a sale
Interestingly the scale is not tiered like income tax. This is easily misunderstood and buyers are often stung for a stamp duty bill higher than they expected. For example to buy a home for £260,000 the 3% rate applies to the TOTAL price rather than 1% between £125,000 and £250,000 and 3% on the amount £250,000 to £260,000.
Stamp duty rakes in £6.5bn to the Treasury! It is a major cash cow. It is a tax which is worth far more to the government than was originally intended. This is because the bands have not been adjusted to reflect the dramatic rise in price houses. An average London house price is now £371,983…..(source bbc news).
Stamp duty now targets far more individuals than many people believe is fair. Certainly in London property it often costs less to build a loft extension and add a further bedroom on to your home rather than move house altogether and pay the required stamp duty. This arguably suffocates the market as it stops those on the ladder progressing upwards which impacts the entire housing chain.
So the tax itself isn’t perfect. But would a suspension work? Could it just store up more trouble for buyers later down the line? Or will it give some buyers the leverage to get on the ladder and a few more months to save before the bill arrives? Time will tell. One thing is for sure a decision is needed to redress the confusion.
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