The government should slash stamp duty to help boost housebuilding and encourage people to buy their own homes, a new report has stated.
Stamp duty is the second most unpopular UK levy behind inheritance tax, and a gradual rise in rates has meant the average buyer in England pays £2,300 when they buy a property.
Think tank the Centre for Policy Studies (CPS) branded stamp duty a “tax on mobility and aspiration” and urged the government to raise the threshold from £125,000 to £500,000.
The report, drawn up by former No 10 housing adviser Alex Morton, proposed that a four per cent levy be charged on properties between £500,000 and £1m, and five per cent on anything higher.
Prime Minister Boris Johnson has supported the idea of stamp duty reform. However, uncertainty over the cost of the move, coupled with chancellor Sajid Javid’s decision to cancel his planned Budget on 6 November, has cast doubts on the tax cuts.
Stamp duty currently raises £5.1bn for the government. However, the CPS argued a reform to the tax would cost only £1.6bn due to the positive impact of increased transactions.
The report estimated that a one per cent cut in stamp duty rates would increase housing transactions by roughly 20 per cent, which in turn would lead to more homes being built.
Moreover, it stated that the cost of reforming the tax could be further offset by a new three per cent levy charged to foreign buyers snapping up property in the UK. The CPS also argued that stamp duty should be kept on commercial and buy-to-let properties.
“While the Treasury are right to be fiscally focused, they need to take into account the fact that stamp duty on homes has an impact on transactions, which means cutting this tax is cheaper than expected,” said Alex Morton, CPS head of policy.
“We propose mean a far more appropriate rate for the most valuable homes – and taking nine out of 10 people who just want to buy a decent home for themselves and their family out of the tax altogether.”
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