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Is It Time to Scrap Stamp Duty?
Did you know that stamp duty was introduced in order to help fund a war back in 1694? Plus it was only supposed to be around for about 4 years. Now it brings in £6 billion a year for the treasury which means that it is very unlikely to be scrapped or even put under review. It is an inherently bad tax because it decreases the number of transactions likely to take place, as people find it hard to pay such a high tax bill. Currently stamp duty is as follows:
Properties worth £125,000 - £250,000 pay 1% tax
First time buyers are exempt from paying any stamp duty on properties worth less than £250,000
Properties worth £250,000 - £500,000 pay 3%
£500,000 - £1m pay 4%
£1 million + pay 5%
Stamp Duty Land Tax is, for many reasons, considered to be a relic that should be done away with. Here are some of the arguments for it being scrapped or at least adjusted:
Threshold Approach is Unfair
Currently if you buy a property that is just a pound into the higher threshold, you must pay tax on the entire value of the property. This means that if you were to purchase a buy-to-let property in Leeds, for £250,001 you would pay 3% stamp duty (£7,500). Taxing the amount that is over the threshold would be much fairer.
Regional Differences
By the nature of the UK, some areas of the country offer an average house price much higher than other areas. The south east in particular is generally more expensive than in say Leeds or Bradford. This means that less people looking to buy in the south east will benefit from the lower bands of stamp duty making it inherently unfair. Either a complete scrapping of the tax or a scale based on average house prices would be more favourable for all house hunters in the UK.
Tough on First Time Buyers
For first time buyers who can afford to buy properties worth more that £250,000, stamp duty is an added expense that may put them off buying a certain property, or a property in a certain area. This is always going to have a negative impact on the amount of properties that are sold each year which will not help the current stagnation in the market.
Cutting stamp duty is unlikely to happen soon while the government is under such financial pressure. There is however, an argument that doing so, especially as the tax is so completely outdated, would be the kick the housing market needs that could help drag the UK out of its financial mire. But what should come first: the freedom or the tax?
Posted: Monday 7 November 2011
Permalink: http://www.keymove-properties.co.uk/Is-It-Time-to-Scrap-Stamp-Duty
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