The £4bn stamp duty farce: That’s how much higher rate has cost the Treasury by stopping families (like these) from moving up the property ladder
- Philip Hammond faces calls to overhaul stamp duty as it was branded ‘broken’
- Chancellor was told the levy will cost the public purse up to £4billion by 2023
- Former chancellor George Osborne raised tax on homes which slowed market
- Stamp duty for first-time buyers on homes under £500,000 is already scrapped
Philip Hammond faced fresh calls to overhaul stamp duty last night as figures suggested reforms to the levy will cost the public purse up to £4billion by 2023.
MPs, campaigners and experts said the ‘broken’ tax was putting off families from moving up the property ladder and making it more expensive for the elderly to downsize.
The row centres on a decision by former chancellor George Osborne to raise the levy on homes worth more than £937,500. The hike is seen as a major factor in the slowdown in the housing market.
New figures published alongside the Budget yesterday showed the extent to which the reforms are expected to hit tax revenues.
The Office for Budget Responsibility predicts stamp duty receipts will be £3.8billion lower than previously thought from 2018 to 2023.
Conservative MP Greg Hands has campaigned against stamp duty and says it is a ‘tax on mobility’
And they will fall from £13.6billion last year to £12.8billion this year – suggesting Mr Osborne’s reforms have backfired.
‘Stamp duty is a tax on mobility and makes it harder for people to move,’ said Tory MP Greg Hands, a former Treasury minister. ‘The fact the Treasury is now also getting less revenue means it needs to be seriously looked at.’
Mr Hammond has scrapped stamp duty for first-time buyers on homes under £300,000 and for shared ownership homes worth less than £500,000.
But critics last night dismissed the Chancellor’s changes as ‘tinkering around the edges’ and called for the duty to be completely overhauled or scrapped.
John Stevenson, another Tory MP who has campaigned on the issue, said: ‘The stamp duty system is in desperate need of change.
‘One way of doing that would be for sellers rather than first-time buyers to pay, which would at least mean less of the burden fell on people trying to move up the housing ladder.’
The levy is expected to rise again in subsequent years, as house prices increase, but by less than previously thought as people move less.
Experts say the duty is partly to blame for the slowdown in the housing market, with a report by Barclays Mortgages today finding that 54 per cent of homeowners would now rather improve their property than move.
Rachel and Steve Mills with their two-year-old daughter Rosemary, From Ealing, west London
Stuart Adam, of the Institute for Fiscal Studies, said: ‘Stamp duty is a tax that bites every time a property is bought and sold. It gums up the market by discouraging transactions and is a particularly bad way of taxing property.’
Mr Osborne’s changes have been particularly felt in the South East and London. It is also feared that uncertainty over the outlook for Brexit may be causing buyers of expensive homes to delay.
Last night a Treasury spokesman said: ‘Housing market activity is affected by a wide variety of factors, of which stamp duty land tax is just one.
‘Thanks to reforms introduced at yesterday’s Budget, all first-time buyers of shared ownership properties worth up to £500,000 will now be able to take advantage of first-time buyers’ relief.’
The number of property transactions in England in the first six months of this year was 1.2 per cent lower than in 2017, official figures show.
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Luke Murphy, of the Institute for Public Policy Research, said: ‘Stamp duty is an example of a bad tax. It acts as a barrier to those that want to buy their first home and generally discourages the selling and buying of property, reducing the incentives for people to move home.
‘We have called for stamp duty to be replaced by a more progressive annual property tax which would be simpler and fairer.
‘It would also make the housing market more efficient.’
We want to move but £27k levy is too much
Rachel and Ste Mills are desperate to trade in their two-bedroom flat for a larger home.
Their property in Ealing, west London, is just big enough for the couple and their two-year-old daughter, Rosemary, who sleeps in a box room.
But difficulties arise when relatives stay over – forcing them to use the sofa or an airbed.
The couple would like a three-bedroom house in the same area, to stay close to friends and Mr Mills’s job at Sky Sports. But this would cost around £750,000 with a £27,500 stamp duty bill on top of that.
Mrs Mills hoped for measures to help families to buy their second home in Philip Hammond’s Budget on Monday but was disappointed.
Hannah Ashley and Tom Adams with their ten month old son Archie at home in Hove East Sussex. The couple pay £600 a month for two days a week child care
She said: ‘There needs to be more support for families looking to move up the property ladder. We’re not looking to buy a mansion, just a three-bedroom home.
‘It’s really hard because you have to save up for a deposit and all the other costs, like moving itself, and then you have to basically pay another deposit on top of that in stamp duty.
‘Ideally we would like to move sooner rather than later. We want to start expanding our family and there’s just no space here.
‘We don’t have space to put a bed in my daughter’s room, neither our room. It’s really affecting us.’
She added: ‘We have no choice but to save up for the stamp duty. It’ll take us years.’
Staying put is out only option
Hannah Ashley, 33, and Tom Adams, 37, plan to move from their three-bedroom home to a better school catchment area for their ten-month-old son Archie.
But with high stamp duty charges the couple fear they will not be able to buy a property in the right area. Miss Ashley said she was also concerned because the pair hope to have another baby soon.
‘We live at the back end of Hove and all of the good schools are outside our catchment area,’ added the digital marketing agency worker. ‘We love our home but we do have only a teeny, tiny patio and we would love a proper garden.’
The pair would need to find £15,000 in stamp duty for a typical £500,000 four-bedroom house in their East Sussex town.
‘It’s horrendous,’ said Miss Ashley. ‘We’re already feeling the pinch with things like childcare costs. If nothing changes with stamp duty, we’ll have to stay here.
‘Stamp duty was supposed to be for the well-off. We’re an ordinary family and we just want to move into a reasonable home.’
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