What if Stamp Duty was abolished?

[Dingledongledell]

I work in an industry that hears lots about tax policy. Stamp Duty is widely regarded to be the UKs most stupid tax. It stops people loving house when their house no longer meets their needs and prevents them from moving areas to take new jobs. It is incredibly economically damaging.

I have a big house as we bought it to accommodate multigenerational living. My MIL is now in a care home and I’d love to downsize. I’d love to live mortgage free, but if we downsized to a property £150k cheaper than our current house any savings would be largely eaten up by stamp duty.

I feel trapped in a big house with a big mortgage. We paid a vast amount of stamp duty to move here not too long ago. We are surrounded by neighbours who have lived in their large houses for many many years. Why should I pay hundreds of thousands in stamp duty over the years just because we move house, when others can sit in vast houses paying nothing more than council tax? It makes no sense to me.

What changes would you make to your current living if stamp duty was abolished?

I appreciate that living in Scotland where stamp duty is far, far higher than in England just exacerbates this problem.

In which case this is wealthy people asking for tax breaks. Tough. I am moving soon and will pay £100 SDLT, which is more representative of the UK population.

So the lesson I’ve learned in this thread is that London and the SE fucks the system entirely due to the skewed property prices.
I live in Scotland and our LLBT is significantly more than in England, it’s a pita but we aren’t all trying to offload houses that are in the millions of pounds price point.
With that in mind I’ll just mute the thread because my heart just breaks for you all.

Yes, this is just what we need, house prices to increase even more.

I have a three bedroom bungalow with a decent garden and I want to move to a wheelchair accessible bungalow with a decent garden nearer to my work.

The two properties are on paper the same price, but after I pay stamp duty and estate agents’ fees, plus solicitors, I can’t afford to move to a house that is supposedly the same price as mine, just with proper modifications for me to be comfortable there.

The whole system seems mad - I agree that there need to be changes but from a personal point of view an exemption for adapted properties like the exemption on VAT for aids and equipment is what would help the most.

Obviously SDLT affects people who are purchasing valuable properties more but I don’t think the OP is arguing that wealthy people should be taxed less, but rather that choosing to tax them for moving creates perverse incentives and is not good for our housing market. Tax them in different ways (like for holding the asset via reformed council tax for example)

They should work on growing the economy (Like they said they would in their manifesto) and bringing in more normal tax rather than twiddling with things.

I would prefer them to lower the NI rates for employers and look at ways to grow the economy rather than crush it.

I wouldn't trust Labour to water a house plant.

But you can tax the wealthy in many ways. This particular way encourages the wealthy (or property-rich-cash-poor elderly people, of whom there are millions) to take up more property than they need, in places they may no longer need or want to be (near jobs) but that others desperately need.

Why not load that tax onto income tax or land value tax or pretty much any other tax that doesn’t constrict housing supply instead.

I think we should abolish stamp duty, inheritance tax and pay less income tax, but then I'm in favour of a small a State as possible.

Why should those who bought their forever house have to fund you moving house constantly?

But those living in London are much worse off than you so your heart should be breaking. Disposable income after housing is lower in London than anywhere else in the uk as housing is so expensive

Or, it discourages them from buying large/multiple properties in the first place.

And you'll be happy to step over the bodies on the way to the opera.

If they abolishes stamp duty, house prices would jump by exactly the same amount and then some the next day. Effecting anyone trying to upsize so they can have children for e.g., and any young people buying their first home.

Meanwhile cranking up council tax would drive people out of their homes- probably hitting people who are already struggling hardest. People think this would be the elderly, but if actually imagine it would be working families with small children already struggling to cover childcare, bills etc.

But, yes, let's change the entire tax system to suit you and your circumstances OP.

Hmmm I’m not sure. Those of us lucky enough to have houses to downsize from probably made a lot of money from rising prices. Prob more than covers the stamp duty.

people who want to downsize can - they can buy a cheaper property so absorb the cost of stamp duty. Plenty do that. I can see why people don’t want to but it is a choice.

Property is an unusual market:

i) people often need a large property when they are young with family, but not later,
ii) people need to be close to jobs while they are working, but not later,
iii) people often can’t afford property when they need it most (when young).

So a large SDLT isn’t discouraging a lot of very wealthy young couples from over-buying property when they don’t need the space and don’t need the location, because the number of people in that situation is very small. The number of people who have families and jobs, but later retire, though, is huge. That’s who this tax is cementing in place.

That’s not what the data shows, from countries that have had SDLT holidays. Base prices rise but by less than the tax cut, so total prices fall a little.

Also, there’s benefit just from having people living in the properties that best suit their needs, even if total price stayed the same (which evidence suggests it doesn’t).

If you don’t want the money raised via council tax then fine — this isn’t a thread on what a great tax council tax is. It’s about what a bad tax SDLT is. I’d put it into a land value tax myself, which would be more progressive and less distortionary.

Being of the generation that is supposed to be holding onto over large houses because of stamp duty - that’s a complete load of bollocks.

people stay in their forever family home ( in my case a 3 bed north facing estate semi which no one in MN actually every wants anyway ) because it’s just that - my home

so what that the second bedroom is only used when family visit , I am used to this home and still love it
And the area , my friends and neighbours

what I am seeing is people my generation upsizing when inheritances come through - again not bothered by stamp duty. I think they are mad but there you go. Just because they are older doesn’t mean they don’t desire things. And people selling very large multigenerational homes when the older generation dies. Again stamp duty isn’t a factor in that choice. And mostly just living in the home they love and have memories in

just wait for us all to die

what stops people moving is the high house price but
when stamp duty was tweaked in Covid it just led to higher house prices and as a nation we need house values to fall relative to income to make both buying and renting affordable

100%. Moving is (nearly always) a choice. Can't pay the stamp duty, don't move then. But no choice but to pay council tax.
The only change I would make would be to add the stamp duty to the sellers costs rather than the buyers, more like a capital gains tax. If someone is downsizing they will have the money to pay it, and if someone is upsizing they will pay it on the sale of their property. But this enables more first time buyers to get on the housing ladder and reduces pressure on rentals.

But that doesn't happen. People buy bigger houses when they need them (ie when they have children) and although they have to pay SDLT, the benefit of having a sufficiently large house for all your kids to have a bedroom (if you can afford it) is sufficient that they do it anyway. The converse is not true though - downsizing is much more discretionary so the SDLT is a significant barrier to people making that move.

It's insane that all the tax on ownership is paid at the moment you buy somewhere. It's also insane that we paid twice as much SDLT as a neighbour who bought 10 years before, and less than a fifth of what neighbours who moved recently paid. Seriously, it's mad.

But it's also hard to see how to undo it.

For us, well, we paid our chunk two decades ago, and although it felt LOADS then, I wouldn't resent paying properly now. But for my neighbours, who just paid up, I can't imagine how furious they'd be if they found they had to pay a land tax AS WELL as the SDLT they've already forked out for.

As others say, why not a system where

a) the ratable value is set based on property valuation (done in past 10 years/most recent sale)
b) the rate is set at a regional level

I do wonder whether there would be a substantial (negative) effect on renters tho... I guess this would have to be a tax that applied to the owner of the property, not the occupier (cf council tax) - and yes I know costs get passed on, but that's the case w SDLT too. It would also potentially cause problems for people who have over-extended themselves and whos circumstances have changed, but mortgage companies ought to take the additional costs into account when thinking about affordability, and the original price ought to be lower...

I don't understand how stamp duty can stop people downsizing. I am in the south east with much higher prices than most of Scotland. I could downsize from my 3 bed £600k house to a 2 bed £350k flat and would still have over £200k left after paying stamp duty.

YANBU. Stamp duty was supposed to be temporary in the 1800s or something. We can’t move partly because of it.

Ridiculous.
I'm with Thatcher. There's no such thing.as society, but rather there are individual men and women and families.
I'm actually happy to chip in to ensure the Triple Lock is maintained, for those who have paid in all their lives. Also happy to support those who are genuinely too unwell to support themselves.
Not so happy with foreign aid and spurious benefits.

The housing market has ground to a standstill so people are coming up with desperate stuff like this to try and get it moving.

House prices need to fall to sensible levels with or without stamp duty, then they will become more affordable and the market will pick up. Hopefully that point will start shortly.

At the moment there is just a stand off between sellers refusing to drop prices and buyers unable to pay.

This situation will not last forever.

The housing market has ground to a standstill so people are coming up with desperate stuff like this to try and get it moving

Well no so desperate they are going to build any houses.