In the last two weeks, stamp duty in England and Wales has come back to the forefront. It seems to have become an annual trend that the stamp duty system is changed or reviewed, so what is it about it that just doesn’t seem to sit right?
By way of context, early in my career the threshold for stamp duty was always intended to avoid the taxation of first time buyers.
So Mark Drakeford announced an overhaul to the Welsh stamp duty system as part of his budget for 2018-19. Under the new system, homebuyers in Wales won’t pay anything on homes worth up to £150,000 – which is certainly something to celebrate, and seems to abide by the tax’s original intentions.
But for those at the higher end, the news isn’t as promising, as they could end up paying significantly more with the addition of the new thresholds at £400,000 and £750,000. Now, this might be pure speculation, but surely if you hinder movement into these higher price brackets (and from a quick look on Zoopla, an ideal family home for many) it will create further pressures on second-steppers who are looking to free up homes for tomorrow’s first-time buyers.
Then on Friday, the BBC reported that Energy minister Claire Perry said she was interested in exploring lower rates of stamp duty for homes that have been made energy efficient. This is a very interesting concept and suggests that people are more likely to purchase properties that have a good energy efficiency rating.
However, this seems harsh on the seller. Yes, it might mean that homes get the upgrades that they need, but there will be added pressure on sellers to renovate their home to keep up with buyer expectations and have a better chance of selling their home quickly. Again, I’m only speculating, but surely in the current market (where new stock is slightly thin on the ground) we want to be encouraging people to go to market, rather than putting barriers in their way.
I am also puzzling how you prepare a transparent quotation for conveyancing when there are so many potential variables to consider.
Of course I could be wrong in my assumptions, but what is clear is that despite numerous overhauls, additions and tweaks, stamp duty doesn’t quite seem to be working in its current form. When the Government first introduced the new system back in 2014, the reforms were welcomed by the industry and 98% of homemovers were set to benefit from reduced rates. But since then, stamp duty has become an issue of contention, particularly with the introduction of the additional 3% levy for additional properties last year.
We know that for 40% of downsizers, the cost of moving home is high, and stamp duty forms a part of this.* For first-time buyers, stamp duty may also be a worry, as most have no choice but spend around £150,000 on their first home which means they will need to pay an extra £500 in stamp duty (and usually aren’t aware of extra costs that moving home entails).**
With the Autumn Budget looming and recent talks of changes and reform, it will certainly be interesting to see whether it will feature in the Chancellor’s plans for the coming year (and whether the right solution for everyone will be put on the table). How about a stamp duty holiday for first-time buyers and downsizers? Or why not transfer the burden onto sellers rather than buyers?
What do you think? Tweet me @stephenchayter.
* My Home Move’s Management Information and research 2016/2017.
**My Home Move’s aspiring first-time buyer survey, April 2017, 1,000 respondents, UK wide.