Monday, 20 November 2017

but only if Stamp Duty completely abolished!
Switch it to a mini-LVT and it would work

Katie Morley, consumer affairs editor 15 NOVEMBER 2017 • 12:01AM Telegraph
Stamp duty is preventing 45,000 house purchases a year, a study has found, as Phillip Hammond comes under growing pressure to cut the tax to help first-time buyers get a foot on the ladder.
The number of home purchases blocked by the tax has doubled over five years, with first-time buyers, home movers and downsizers all affected, according to a new report by the Centre for Economics and Business Research.
It comes as the Chancellor is expected to announce a temporary stamp duty holiday for first-time buyers in his Autumn Budget next week, to help dissipate resentment among Millennials who are stuck renting.
The move would be a victory for the Daily Telegraph, which has campaigned for cuts to stamp duty to help families and boost the economy. 
If brought forward it is unlikely that the policy would provide a full tax break to homes of any value being bought by first-time buyers. 
At a glance | Stamp duty
Stamp duty land tax on property purchases was reformed in December 2014 and is now calculated more like income tax. The rates payable increase marginally, as shown below.
Price band
Owner occupier
Additional property
John buys a £275,000 home. He pays no tax on the first £125,000. The next £125,000 will trigger a 2pc tax charge of £2,500, and the remaining £25,000 will incur 5pc tax worth another £1,250. This gives a total stamp duty bill of £3,750. 
Last night experts suggested the value of tax-free property purchases could be capped at £250,000, or £450,000 in London to reflect higher prices. 
Those buying more properties with values above the threshold may still be able to benefit, but would be likely to have to pay stamp duty on purchase values above the cap. 
Since 2012 an additional 146,000 property transactions would have taken place if Stamp Duty had been removed, the report said. 
Stamp duty only applies to homes worth £125,000 or more, above which a tiered system levies homes more heavily depending on their value. Since 2016 people buying second homes or rental flats have been taxed an extra 3 per cent.
But despite this, some 6,500 purchases of homes by owner occupiers worth less than £500,000, many of whom will be first-time buyers, are being blocked by stamp duty every year. Of these around half are for purchases worth less than £250,000.
The CEBR came up with the figures by calculating the sum of the number of house purchases, the average effective stamp duty rate, and a measure called "transaction elasticity", which is the change in transaction numbers caused by rises or falls in stamp duty. 
Paula Higgins, chief executive at the HomeOwners Alliance, said: "It doesn't surprise me that stamp duty is impacting so many people trying to move up and down property chains. A break for first time buyers would be a clean move and would help thousands of renters onto the ladder. 
"People desperately want to get on the ladder because the country is set up for homeowners, not renters. 
"However the Government will need to think about preventing abuses and will probably have to install a cap at around the same level as the Help to Buy scheme. It should also go for a staggered approach to avoid distorting the market." 
Miguel Sard, managing director of mortgages at Santander, which commissioned the report, said: “First time buyers struggle to get on the ladder, young families want to move up it and the elderly want to downsize, but all are stifled by stamp duty.

“Those aged between 65 and 74 have the greatest average property wealth in this country, and youths have the least. The housing market needs to allow for adjustments in demographics to be mirrored by the supply of accommodation.” 

No comments:

Post a Comment