Scrap stamp duty to give Britain a real help to buy, Government told

Property experts and MPs mount campaign against tax as rising prices make it ‘unfair’ and ‘inefficient’

Tens of thousands of homebuyers face paying three times as much in the stamp duty ‘stealth tax’ because soaring property prices have tipped their home into a higher rate band – leading to property experts and MPs calling for an urgent review.

Official figures published last week showed that the average UK house price reached £250,000 in December. Anyone buying at that price is forced to pay three times as much stamp duty than if they got a cheaper home – 3 per cent rather than 1 per cent.

Central to complaints about stamp duty is the way it is charged in bands, which were set years ago and have taken no account of price inflation.

If you buy a home at £250,000, you pay stamp duty at 1 per cent, a total of £2,500 – but spend just £1 more and the charge soars to £7,500.

“It’s an unfair tax that distorts the property markets,” said Peter Bolton-King, residential director at the Royal Institute of Chartered Surveyors. “It stops people easily moving around the country and makes the market inefficient.”

Financial experts agree. “Stamp duty is out of date and the Government needs to modernise the thresholds and the way it operates so that the tax moves with the times,” said Susan Spash, tax partner at chartered accountants Blick Rothenberg.

Comment: The smart solution is clear - a land value tax

Campaigners at pressure group Stamp Duty Reform said: “It adversely impacts on people at every stage of their life. The Government only gets away with because most people don’t even think about it – until they decide to move.”

A five-year study of the UK tax system undertaken by the Institute of Fiscal Studies described the duty as “highly inefficient, discouraging mobility and meaning that properties are not held by  the people who value them  the most.”

The report was particularly scathing of the tax bands. “The slab structure, with big cliff-edges in tax payable at certain thresholds, creates particularly perverse incentives.”

But rising house prices have made the Government less inclined to make the tax fairer. The Revenue’s calculations predict that the tax take from stamp duty will climb to £9bn by 2017, tripling in a decade.

The Council of Mortgage Lenders said: “The prospect of increasing government revenue from stamp duty reinforces the need for reform. As well as creating market distortions it hampers efficient use of the existing housing stock.”

Experts disagree on how the tax should be reformed. “The tax should be abolished altogether for first-time buyers and swapped from being a purchasing tax to a selling tax,” said Guy Meacock of buying agency Prime Purchase.

“There is strong evidence that transaction levels have been markedly affected since Labour introduced new brackets in the late 1990s and despite the Government’s assurance that it wants to reward aspiration, stamp duty does precisely the opposite, firmly acting  as a deterrent to those wanting to improve their lot,” he said.

Andrew Hagger, analyst at Moneycomms, believes the lower end of the scale needs the most urgent review.

“The Government has pushed ahead with Help to Buy mortgages as it recognised that first-time buyers needed help, yet it still clobbers most of them with a fee of at least £1,250 at a time when they can ill afford it. The £125,000 starting point is farcical – particularly in London and major UK cities.”

Conservative MP Dominic Raab called for the stamp duty to be scrapped on properties sold for less than £500,000. The policy is backed by the Free Enterprise group of Tory MPs whose former members include several ministers.

Mr Raab said the levy had become a “punitive tax on aspirational home-buyers” because of soaring house prices.

“The current rates are crying out for reform – they distort the housing market, and punish hard-working families trying to get onto the housing ladder,” he told The Independent.

The TaxPayers’ Alliance, which is running a campaign for cuts in stamp duty, urged George Osborne to take a fresh look at its rates.

Its chief executive, Jonathan Isaby, said: “Stamp duty is proving an ugly barrier both to first-time buyers and to those wanting to move from an existing home to a bigger or smaller place, depending on their circumstances.

“The Chancellor should be looking to ease the burden by increasing the thresholds or reducing the rates – as well as ending the ‘slab rate’ nature of the tax, because the market currently gets completely skewed at the points where the higher thresholds kick in.”

Ms Spash believes there are easy things the Government can do to modernise the duty – starting with scrapping the 1 per cent rate, which is charged on homes worth £125,000 or more. “It is questionable how much tax revenue it will actually raise with higher average house prices and abolishing it would help those buying their first property.”

Ed Balls, the shadow Chancellor, called in 2012 for a two-year stamp duty holiday on purchases by first-time buyers of properties worth up to £250,000.

The move would “help aspirational men and women who want to get on the housing ladder and are finding it really hard at the moment,” he said.

Labour sources said they could not commit to including the promise of a stamp duty holiday in their general election manifesto next year. But Mr Balls’s comments indicate that he could be sympathetic to the move.

Arts and Entertainment
The first film introduced Daniel Radcliffe to our screens, pictured here as he prepares to board the train to Hogwarts for the first time.
booksHow reading Harry Potter helps children grow up to be gay-friendly
Sport
Frank Lampard will pass Billy Wright and equal Bobby Charton’s caps tally of 106 caps against
sportFormer Chelsea midfielder in Etihad stopgap before New York contract
Arts and Entertainment
A scene from Aladdin is performed at the Tony Awards in New York in June
theatreBrit producer Lythgoe makes kids' musical comedy a Los Angeles hit
Sport
Usain Bolt of Jamaica smiles and shakes hands with a competitor after Jamaica won their first heat in the men's 4x100m relay
sport
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebookA unique anthology of reporting and analysis of a crucial period of history
News
Chancellor George Osborne, along with the Prime Minister, have been 'complacently claiming the economy is now fixed', according to shadow Chancellor Ed Balls
i100... which is awkward, because he is their boss, after all
News
i100
Arts and Entertainment
Adèle Exarchopoulos and Léa Seydoux play teeneage lovers in the French erotic drama 'Blue Is The Warmest Colour' - The survey found four times as many women admitting to same-sex experiences than 20 years ago
filmBlue Is The Warmest Colour, Bojack Horseman and Hobbit on the way
News
Kenny Ireland, pictured in 2010.
peopleBenidorm actor was just 68
Arts and Entertainment
Preparations begin for Edinburgh Festival 2014
Edinburgh festivalAll the best shows to see at Edinburgh this year
Independent
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
santorini
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

(Senior) IT Support Engineer - 1st-3rd Line Support

£40000 per annum: Ashdown Group: A successful IT service provider that has bee...

Wind Farm Civil Design Engineer

£55000 - £65000 Per Annum: The Green Recruitment Company: The Green Recruitmen...

Principal Marine Mechanical Engineer

£60000 - £70000 Per Annum: The Green Recruitment Company: The Green Recruitmen...

Principle Geotechnical Engineer

£55000 - £65000 Per Annum: The Green Recruitment Company: The Green Recruitmen...

Day In a Page

Dress the Gaza situation up all you like, but the truth hurts

Robert Fisk on Gaza conflict

Dress the situation up all you like, but the truth hurts
Save the tiger: Tiger, tiger burning less brightly as numbers plummet

Tiger, tiger burning less brightly

When William Blake wrote his famous poem there were probably more than 100,000 tigers in the wild. These days they probably number around 3,200
5 News's Andy Bell retraces his grandfather's steps on the First World War battlefields

In grandfather's footsteps

5 News's political editor Andy Bell only knows his grandfather from the compelling diary he kept during WWI. But when he returned to the killing fields where Edwin Vaughan suffered so much, his ancestor came to life
Lifestyle guru Martha Stewart reveals she has flying robot ... to take photos of her farm

Martha Stewart has flying robot

The lifestyle guru used the drone to get a bird's eye view her 153-acre farm in Bedford, New York
Former Labour minister Meg Hillier has demanded 'pootling lanes' for women cyclists

Do women cyclists need 'pootling lanes'?

Simon Usborne (who's more of a hurtler) explains why winning the space race is key to happy riding
A tale of two presidents: George W Bush downs his paintbrush to pen father’s life story

A tale of two presidents

George W Bush downs his paintbrush to pen father’s life story
Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover

The dining car makes a comeback

Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover
Gallery rage: How are institutions tackling the discomfort of overcrowding this summer?

Gallery rage

How are institutions tackling the discomfort of overcrowding this summer?
Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players

Eye on the prize

Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players
Women's rugby: Tamara Taylor adds fuel to the ire in quest to land World Cup

Women's rugby

Tamara Taylor adds fuel to the ire in quest to land World Cup
Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

The day America’s love of backyard tigers led to a horrific bloodbath

With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

How Samuel Beckett became a French Resistance spy

As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
We will remember them: relatives still honour those who fought in the Great War

We will remember them

Relatives still honour those who fought in the Great War
Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

Kodak's last-ditch bid to keep celluloid alive

Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

Acting in video games gets a makeover

David Crookes meets two of the genre's most popular voices