Treasury ‘looking at property tax to replace Stamp Duty’

Stamp Duty may be scrapped and replaced with a new form of property tax, according to a report in The Guardian.

The newspaper claims senior ministers have briefed officials to study and model an alternative “proportional” property tax.

Officials are examining a potential national property tax that would replace Stamp Duty on owner-occupied homes. They are also considering a local property tax to replace council tax in the medium term in an effort to repair waning local authority finances.

It also claimed that no final decisions has been made but speculates the new national tax replacing Stamp Duty, could be implemented during this parliament.

Rachel Reeves is looking to boost coffers by tapping into the ‘unearned’ capital appreciation of the private housing stock.

The national tax would be paid by owner-occupiers on houses worth more than £500,000 when they sell their home.”

The report goes on to say that “the national tax would be paid by owner-occupiers on houses worth more than £500,000 when they sell their home. The amount paid would be determined by the value of the property, with the rate set by central government, which would directly collect the proceeds via HM Revenue and Customs. It would not replace stamp duty on second homes.”

A spokesperson from HM Treasury has said: “As set out in the Plan for Change, the best way to strengthen public finances is by growing the economy – which is our focus.

“Changes to tax and spend policy are not the only ways of doing this, as seen with our planning reforms, which are expected to grow the economy by £6.8bn and cut borrowing by £3.4bn.

“We are committed to keeping taxes for working people as low as possible, which is why at last Autumn’s Budget, we protected working people’s payslips and kept our promise not to raise the basic, higher or additional rates of income tax, employee National Insurance, or VAT.”

Industry reaction

Paula Higggins of HomeOwners Alliance

“Stamp Duty is unfair, outdated and stalls the housing market.

“Our research shows that nearly half of homeowners considering a move say Stamp Duty puts them off, and it particularly penalises growing families and downsizers. Tinkering won’t fix it. The only solution is to scrap Stamp Duty completely.

“On the suggestion of introducing a new property tax there shouldn’t be a money grab by treasury at the expense of homeowners. It’s an attack on homeowners and history shows that introducing a new tax is never followed by the removal of older taxes.

“In the interim the government needs to tread carefully. Uncertainty around property taxes causes paralysis in the housing market. We’ve just seen how damaging this uncertainty can be: in April this year, when Stamp Duty thresholds changed, transactions collapsed by 64% in a single month – the sharpest fall on record. Homeowners can’t afford a repeat.”

Simon Gerrard, Chairman of Martyn Gerrard Estate Agents

“The existing Stamp Duty regime is unfit for purpose and has had a chilling effect on the housing market, which is why I’ve long campaigned to reform it.

“It’s good to see that the Government has understood some of the issues and is taking action to end the broken system. Adding further costs to purchasing a home has only reduced transactions, stifled upward mobility and prevented the efficient functioning of the housing market.

“This new tax would be paid by the seller, rather than the buyer which means that it won’t be the same tax on aspiration that Stamp Duty currently is.

“However, it’s clear that the Government is motivated by a desire to raise revenues and I’m concerned that this new tax is going to be punishingly high. If that’s the case, you’re going to see a ceiling at the £500K threshold for that band of the market, as people avoid falling under the regime, and then a significant jump in values with nothing in between.

“Prices above £500K will skyrocket as sellers account for the losses caused by the tax, that used to be paid by the buyer.

“What most worries me is the effect on families in London. The housing market is far higher in London, which means any family home will be impacted by this new tax. If prices surge higher because of this new regime, how will anyone in the capital start a family?

“The Government needs to think very carefully what the wider repercussions these changes might have and act carefully. So far many of its attempts at raising revenues through tax, such as the Stamp Duty changes earlier this year, have backfired.”

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Author: Gemma