How Likely is Stamp Duty Reform?

Stamp Duty Land Tax is a tax that people who buy property or land costing more than £125,000 (or £40,000 for a second home) must pay to the government. This tax applies to both freehold and leasehold properties – whether you’re buying outright or with a mortgage.

 

There are several rate bands for Stamp Duty with the tax due being calculated on the part of the property purchase price falling within each band.  For example, if you buy a house for £275,000, the Stamp Duty Land Tax (SDLT) you owe is calculated as follows:

 

 

Total Stamp Duty Land Tax payable = £3,750

 

If you’re a first-time buyer in England or Northern Ireland, you will pay no Stamp Duty on properties worth up to £300,000. For properties costing up to £500,000, you will pay no Stamp Duty on the first £300,000, but you will pay Stamp Duty on the remaining amount, up to £200,000.  If the property you are buying is worth over £500,000, you will pay the standard rates of Stamp Duty and will not qualify for first-time buyer’s relief.

 

For people who have purchased a property before, the rates are:

 

In recent weeks there has been speculation that Boris Johnson’s government will look again at the stamp duty system. However, the government has dismissed warnings from the House of Lords that a stamp duty shake-up is needed to revamp the lethargic housing market and increase intergenerational fairness in the UK.

 

Whilst the mooted reforms make good headlines and would be welcomed by many buyers and sellers, the current political environment may make them difficult to deliver as they would jeopardise substantial revenues.

 

The government claimed its 2014 reform, which meant the tax was increased at the top end of the market and tax was payable on the portion of the property which falls within each rate band rather than being due at one rate on the entire property price, has cut the rate of duty for the vast majority of buyers. It has also said that it has helped first-time buyers get onto the housing ladder with its reforms in 2017. 

 

At this stage there appears to be little enthusiasm to shifting the stamp duty burden from the buyer to the seller. Arguably that does little other than rearrange the deck chairs, and may simply translate to higher house prices. It may also be a major discouragement for those at the top of the housing ladder wanting to downsize, and this could further limit the stock of family housing. This does however increase the argument for relief targeted at downsizers that would in turn increase transactions lower down the housing chain.