David Prosser: An unjust tax on housing

Outlook: One of the points made yesterday by the Institute of Fiscal Studies in its excellent-as-ever dissection of the Budget is that stamp duty is the most inefficient of all the taxes we levy in this country, creating huge distortions in the housing market. How right it is.

One can argue about whether it is fair to ask buyers of million-pound houses to pay more duty in order to ensure first-time buyers pay less. What is indisputable, however, is that the fact you pay the duty at the highest rate on the whole house price makes no sense.

It means now, for example, that the duty on a house worth £249,000 is zero, but the bill for a £251,000 property is more than £7,500. At the next threshold, the bill on a £499,000 buy is about £15,000. At a price of £501,000, the duty totals just over £20,000. So £2,000 on the purchase price costs you £5,000 in tax. With the additional £1m threshold, there will now be another anomaly.

The result is that prices at these levels are distorted – for example, no one will now value their home at less than £30,000 above the £250,000 bar. To do so just invites buyers to bargain you down.

The housing market is a legitimate target for tax changes. But this was a missed opportunity to overhaul stamp duty properly.