Boris Johnson has declared more than once to reform Stamp Duty and, on the face of it, that’s a good thing as it undoubtedly isn’t ideal in its current format. Or any of the formats it’s been for my entire time in the industry.
However, whatever proposal is mooted by whatever party, body or individual, it is pretty much guaranteed to be met with a barrage of criticism and scepticism.
BoJo’s latest suggestion is actually the brainchild of the AAT (Association of Accounting Technicians). The idea is that the seller pays the Stamp Duty, not the buyer. It’s an interesting proposal with some obvious benefits, but equally some obvious downsides.
Number one on the plus side is that it makes upgrading more attractive because you gain by paying less tax as you climb the property value ladder. It would also mean, from a Government coffers point of view, they’ll receive more income because they wouldn’t have to exempt First Time Buyers (FTB) as they do now on lower priced purchases. Finally, the penal Stamp Duty being removed on investor purchases would encourage them back to the market and that would be very healthy.
On the downside, if the market goes backwards and people end up in negative equity or close to – not only do they have all the other costs of sale, but they would now have a Stamp Duty bill too. And the other significant one would be the expectation that lenders will want a bigger deposit to protect the fact the sellers have bigger debt exposure. And seeing as the biggest problem getting FTBs moving in the struggle to save for deposits already, this wouldn’t help.
I’ve no idea what this body’s knowledge is of the housing industry, but although I’ve seen a lot of doubt online over their qualifications to speak on the market, my suspicions are they wouldn’t have formulated such a plan without a serious amount of consideration and research, so I don’t think it can be cast aside so lightly.
It’s also not realistic to abolish Stamp Duty. It’s around £9 billion into the country’s finances that can’t simply be dropped.
So I’m quite open to change and don’t think this idea is without merit. There does have to be provision for the negative equity scenario and lenders need to be considered, but overall I think the pros well outweigh the cons. I do also think the banding and percentages need a review too.
For those criticising the plan, you’d have to come up with an alternative proposal that has genuine merit and mathematics behind it, before you can simply be scathing. It’s too easy to criticize in a heartbeat – this is a complex issue and huge sums of money.
Whatever the idea/solution might be, it needs full analysis and data testing, which I assume (but don’t know) is what the AAT have done. No solution is going to be a win for everyone.
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