Government must overhaul stamp duty land tax radically to create a fairer system for consumers, says RICS (Royal Institution of Chartered Surveyors).
Proposing a system that would benefit 99 percent of home buyers, RICS called on the Government to find a way of implementing the policy, which the industry body claims will provide a boost to the economy and the faltering housing market.
The proposal asks for the abolition of the existing ‘slab’ system, replacing it with a two tier marginal tax system. No one will pay stamp duty on the first £150,000 of a house price. Above this value a 2.5 percent marginal rate would be charged on every pound up to £250,000, with a 5 percent marginal rate applying to every pound thereafter.
Everyone purchasing a home under £1 million will pay less stamp duty, benefiting 99 percent of all prospective homeowners. Currently, a buyer looking to purchase a £250,000 property will pay £7,500 in stamp duty. Under the proposal they would pay only £2,500, making the property market more accessible, especially for those first time buyers struggling to pull together the funds needed to get on the property ladder.
With transaction levels plummeting first time buyers have been hardest hit seeing their home ownership dreams evaporate. With long-term house price rises outstripping wage inflation, food and fuel bills rising, and tighter lending criteria being applied by mortgage companies, the residential property market is becoming more inaccessible.
Take a holiday from stamp duty
RICS Director of External Affairs, Gillian Charlesworth: “After having mortgages pulled from beneath their feet from lenders facing the full brunt of the credit crunch, consumers are looking to the Government for help. HM Treasury needs to find a way to implement this policy or, if they can’t do this imminently, to introduce a stamp duty holiday that will get the market moving.”
Initially the proposal will reduce Government revenue by up to 24 percent, but given the 40 percent rise in stamp duty revenue in recent years (up from £4.6 billion in 2005/06 to £6.45 billion in 2006/07) there is room for the Government to manoeuvre. The RICS proposal for Stamp duty land tax:
- Slab tax system reformed to a two tier marginal tax system that reduces barriers to vast majority of homebuyers moving onto or through the market
- No-one pays SDLT on first £150,000 of home purchase
- 2.5 percent marginal rate on the value of homes between £150,000 and £250,000
- 5 percent marginal rate on the value of homes over £250,000
- The thresholds for stamp duty rates should then be annually indexed, reflecting house price growth and inflation
- Everyone purchasing a home up to £1million would pay less stamp duty
- Purchasers of the most expensive homes would pay more stamp duty. However, the increases are relatively minimal – the SDLT bill on a £1.5m home would only be 8% higher in total (£5,000 extra).
