Property experts urge Rachel Reeves to abolish ‘sin tax’ of stamp duty in budget | Stamp duty
Rachel Reeves has been called on to remove the stamp duty “sin tax” from the budget by property experts including TV presenter Kirstie Allsopp; as the chancellor has faced calls to replace it with an annual property tax.
Allsopp, presenter of property programs including Channel 4’s Location, Location, Location, said “people are in a panic” about possible stamp duty changes and are “sitting tight” ahead of the November 26 budget.
Addressing MPs on the treasury committee, he said: “We have to be very careful not to see buying property as a sin because it is now a sin tax. Like cigarettes, alcohol and first-class travel.
“You’re essentially being penalized for wanting to buy a more expensive property than before, and that’s wrong… Everyone tells you that encouraging people to move house is economically positive.”
The Treasury is considering a new tax on the sale of homes worth more than £500,000 as a step towards a radical overhaul of stamp duty and council tax, the Guardian revealed in August.
The Treasury is also reportedly considering changes to capital gains tax relief on main residences (at the highest level) and the “mansion tax” on pricier properties.
The comments come as Taylor Wimpey, one of Britain’s biggest housebuilders, reported a slump in sales in the crucial autumn period and blamed uncertainty around the move to the budget for potential buyers delaying purchases.
Other experts questioned by the committee said that stamp duty, Tax on property purchases over £125,000should be removed.
Kate Willis, technical lead for property tax at the Chartered Taxation Institute, said: “It’s relatively easy to collect. It’s quite difficult to avoid. It raises revenue.” However “Economists almost universally agree that this distorts economic activity.”
Richard Donnell, research director at property website Zoopla, said 40% of first-time buyers looking to buy through Zoopla (about 80% in London) will pay stamp duty, with an average bill of £16,000 (about 3% of the value of the property). “So it was quite a blow for them.”
He added: “At the same time you exclude a lot of people from owning a home and that puts huge pressure on the rental market.”
Tim Leunig, economic director at Public First Consulting and a former adviser to many ministers including Rishi Sunak, said: “Every single person in the country suffers from stamp duty from land tax because it restricts people’s movement. It restricts your access to a better job opportunity and as a result GDP is lower.
“Tax returns are lower because of income tax, VAT, etc. The biggest losers are really young people because they move more frequently.”
However, he warned that house prices would rise, especially in London, if stamp duty was abolished.
Instead, Leunig proposed an annual property tax that buyers of homes over £500,000 would pay. One Report for centre-right think tank NextIt has proposed a tax of 0.54% per annum on home value, with a higher rate for any home worth more than £1 million.
Asked about a mooted estate tax (for example, a 1% tax on properties worth more than £2 million), Allsopp said: “I think there will be a lot more properties worth £1.9999 million.”
Leunig said: “I’m not sure why someone who pays £2 million for a house should be taxed more than someone who spends half that money on a house or a yacht in the south of France. If you’re going to have a wealth tax, you should have a wealth tax rather than isolating one form of wealth.”
