Peter Young of John D. Wood is petitioning the Government to suspend Stamp Duty on the purchase of all houses until 2012, in an effort to oil the wheels of the property market. The idea isn’t new. In December 1991, then Chancellor Norman Lamont temporarily raised the threshold of Stamp Duty from £30,000 to £250,000. According to Save 100,000 Homes from Repossession, a report by the Centre for Policy Studies (CPS), the increase exempted 99% of properties from paying the 1% purchase tax. As a result, the number of mortgage approvals jumped from 70,000 to about 90,000. In today’s money, a similar shift of threshold would mean that all properties below about £1 million would be exempt.
The suspension was lifted in August 1992, but the Conservatives raised the threshold again to £60,000 in March 1993, and new mortgage applications went up again. It was Gordon Brown as Chancellor who, in 1997, ordered what is regarded now as one of the easiest revenue-raising measures in tax history: he introduced levies of 1.5% on £250,000-plus homes and 2% on £500,000-plus. Unsatisfied with the results, the duty on these thresholds was then increased to 3% and 4% in 2000.
That these goalposts were never moved as the property boom took off has irked everyone, but the pill was easier to swallow when values were heading skyward. Today, Stamp Duty tax is putting many people off buying. ‘I had one wealthy client recently who wanted to downsize her London house in order to release some equity to set her children up in flats of their own,’ says Peter Young. ‘By the time she’d done the maths, taking into account the fall in values, she decided that most of the money that she would have released would go in paying taxes and moving costs, and pulled out.’
So far, this Government has done little to alleviate the problem, save for tinkering around the edges. Last September, it announced that Stamp Duty would be frozen on all transactions below £175,000 for a period of 12 months. We’re now halfway through the freeze, and the headlines tell the success of the policy. Just over 30,000 sales exempt from paying the tax have gone through; the Government has lost £46.5 million a mere bagatelle when you consider that the tax has netted many billions of pounds in the past few years. Last month, the CPS said that this temporary extension of the threshold has been ‘ineffective’.
However, property transactions halved between 2007 and 2008 from 1.3 million to 600,000, which meant that the Exchequer lost £2.7 billion in Stamp Duty levies last year. Mr Young believes transactions for 2009 will fall below 500,000. ‘I don’t know what the cost has been to the Government of lowering VAT to 15%, but surely there is more revenue to be made in VAT even at 15% through the associated costs of all the goods and services used during moving and redecorating than from Stamp Duty on far fewer sales.’
The Conservatives have already spoken out against the tax. A spokesman for the party told us: ‘In order to assist the housing market, it’s vital that first-time buyers are given help to get a foot on the ladder. Whereas the Government’s Stamp Duty holiday has done little to help the housing market, the Conservative Party would scrap Stamp Duty for first-time buyers on properties worthunder £250,000 meaning nine out of 10 would pay nothing at all. It’s also important that the housing market is free from red tape and bureaucracy, which is why we will scrap the needless and expensive Home Information Pack.’
Similar sentiments are expressed by Jonathan Bram-well of buying agents Prime Purchase. ‘We didn’t have a problem paying this tax during the boom, but now it hurts. The Stamp Duty paid on a £1 million house is £40,000 that means you’ve got to earn an extra £70,000–£80,000 in income to pay for it. Now that there aren’t any bonuses around, that’s not easy money to come by.’
Mr Bramwell believes that the associated costs of moving house are discouraging people from selling and taking up new jobs. ‘And now that the Govern-ment’s talking about capping multiples of borrowing against salary, refusing to ditch HIPs or suspend Stamp Duty, it’s a triple blow. They should do anything to get the market moving.’
To add your signature to Peter Young’s petition, visit http://petitions.number10.gov.uk/suspendstampduty