Opinion: Should Philip Hammond scrap stamp duty or reform it? Either way, these first time buyers think something has to be done

Jack Brentnall and Katie Gabriel
David Cameron Chairs Weekly Government Cabinet Meeting
Source: Getty

Scrap stamp duty – revenue should not come at the expense of working people by Jack Brentnall

Benjamin Franklin famously said that our only certainties in life are death and taxes. Thankfully, Stamp Duty Land Tax (SDLT) does not have to be such a certainty. Considering the context of the current housing crisis, it is about time that we finally did away with it. While government revenue streams are obviously important, this cannot come at the expense of working people and the health of the housing market.

We are currently faced with a cyclical situation in which older people are punished for downsizing, meaning that many of them choose to stay in their larger properties. Clearly this worsens the already poor supply of homes for those seeking to upsize. We are now in a position where the average age of today’s second-time buyer is 42, compared to 29 in the 1970s.

Everyone is acutely aware of the struggles young people have getting on the housing ladder – SDLT serves simply as another impediment to this.

First-time buyers are also penalised. Already struggling to meet the demands of a deposit, they are then left with another substantial bill to foot. Everyone is acutely aware of the struggles young people have getting on the housing ladder – SDLT serves simply as another impediment to this.

Yes, stamp duty brings in a sizeable amount of money for the exchequer, but at what cost? It prevents mobility, both in a social and geographical sense by punishing buyers, leaving many unable to move from their current properties. It worsens the problems we already face in a housing market struggling to keep up with demand.

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And while there are moves that could be made to make the tax fairer and less punitive, why not abolish it? If recent reports are to be believed, scrapping the tax would create a substantial boost to the housing market, with some putting the figure at £10bn. If we are serious about a housing market that works for everyone, then the abolition of SDLT is a bold and sensible step in the right direction.

Reform stamp duty - It would be fairer to structure SDLT as a Capital Gains Tax by Katie Gabriel

The government raised £2.6bn in residential Stamp Duty during the third quarter of 2017. The reality is, Stamp Duty brings in too much money for the Chancellor to scrap it. What would replace the gaping hole in Government revenue?

That being said, it is in dire need of reform. And when I say reform, I mean a complete overhaul.

As the Yorkshire Building Society argued earlier this year, Stamp Duty should be levied against sellers, not buyers.

Doing so would help reduce costs for first-time buyers and help those on the property ladder move into more suitable homes, freeing up smaller homes.

If a landlord has a portfolio of 10 homes and makes a profit of £25,000 on each of them, then is it fair for the buyer to pay Stamp Duty?

However, reforms need to go beyond this. Stamp Duty needs adapting so that it reflects our current housing market. Although rates of Stamp Duty differentiate slightly through the threshold structure, it is still too rigid.

Rather than scrapping it completely, Stamp Duty should be structured as a Capital Gains Tax. Instead of the impersonal thresholds, rates of Stamp Duty should fluctuate, wholly dependent on the level of profit made during each house sale.

As in any other line of business, you would be taxed on your profits. If a landlord has a portfolio of 10 homes and makes a profit of £25,000 on each of them, then is it fair for the buyer to pay Stamp Duty?

Scrapping a multi-billion-pound income generator is irresponsible. It also seems counterproductive at a time when we need more money to invest in housing. Therefore, if the revenue generated from Stamp Duty was ring-fenced to help fund the homes needed, it would give the tax a fairer purpose.

How we approach housing generally needs to change. Philip Hammond should use the upcoming Budget to demonstrate the Government’s understanding of this. Reforming Stamp Duty won’t solve the housing crisis on its own, but it would be a good start.

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City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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