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.

Depends on where you are. Looking at revenue.scot/calculate-tax/calculate-property-transactions a £500,000 house in Scotland attracts a £23,350 LBTT (Scotland's version of stamp duty).

In England yes that SDLT would be around £15k. In Scotland it's £23,350 according to revenue.scot/calculate-tax/calculate-property-transactions

But I’m asking about the government we have right now. You know, the ones making the decisions now. The ones who talked about growth ad nauseam during their election campaign.

When will we move on from ‘but what about the tories…?’ as a defence for this shit shower of a Labour government?

The enormous difference Serendipity is what was actually going on in the 20s 30s and 40s.

Slum clearance. Everywhere
Due to health scares and basically the fact the country was full of slums.
So a major housebuilding initiative took place to accommodate the slum population

Then and now are not comparable

Agree

What would you have this government do that is different to what the last governments did then ? And how long would you expect to see it take to work ?

If the previous governments couldn't sort things out in 14 years, then why does the next one need to do it in 14 days ?

Assuming we have a change of government in 2029, the will the incoming administration only have 5 hours to fix things ?

Will we reach the point where space time means the government after that should have already fixed things before they are elected ?

It is way too high and is incredibly damaging in its impact on labour mobility and of course on downsizing. Our village is full of older people who would like to downsize but not willing to part with the huge sums in stamp duty.

£23,350 in Scotland. If I think of my post tax earnings in my first job, that’s working for a year and a half just to be able to pay the tax when I move house. That’s crazy!

It’s scrapping a tax on the wealthy when they move house, funded by a reorganisation of land taxes which shifts the taxes paid on to the wealthy (ie a land value tax). And land value taxes are a form of wealth tax that the wealthy can’t duck out of easily.

I agree, we want to move again, quite soon after last move (5 years) but psying £££ in stamp duty is putting us off (although did benefit ftom covid stamp duty reduction first time round).

Likewise my parents want to move and downsize, but would probably end up buying a smaller but quite expensive house so stamp duty would be £££, freeing up a lovely family house in popular area...but stamp duty is putting them off moving, as they don't 'need' to move.

Handing over money to Rachel Reeves that people living in a similar sized house (ie are probably equally wealthy) don’t have to pay because they’re not moving. It’s the fact that we are being penalised for moving that is mad. People moving house regularly to a house that meets their needs is good for society, and yet we seek to penalise it.

And stamp duty has to make up part of your deposit. You have to have it in cash on top of your deposit. Just makes it even harder to move house.

goodness I feel for the person who wants to move to a wheelchair friendly house. That’s madness.

I don't understand that mindset. It's not like that they can eat that money. All they can do is leave the property to dc. It seems a shame to forego moving home to leave a few thousand more to dc.

If they’d rather leave it to their children it’s their choice and right and I would imagine that’s exactly what people want to do
That and stay in a property they brought their kids up in or have historical memories
Many elderly people don’t live long after a move. It can be very stressful in far more ways than younger people moving

If they can’t afford to live in their home they’ll move house

I agree that the amount of tax paid across the board in Scotland compared to the rest of the UK is ridiculous but people keep voting the SNP into power, so what can you do.

In saying that, if I was buying a £500k house here I’d be in a pretty good financial position - I don’t grudge paying tax in and of itself. I do grudge people endlessly complaining about the state of public services and seeking tax exemptions, while also saying taxes should be lowered. How do we balance the books?

DH and I live in a three bedroomed, two reception roomed house. One bathroom upstairs, smallish garden. We’re in the North of England, if we sell up we’ll probably get around £220-240k. A smaller, accessible retirement flat in the same area would cost roughly the same, (some cost more) and as well as stamp duty, there are extra monthly charges, block maintenance and cleaning, warden services etc.

We don’t have big pensions, we’d like to downsize, we’re heading for 80, and have various health issues, and our ideal scenario would be to rent for the remainder of our lives. We’d be self funding, and living in the right accommodation has been shown to reduce the likelihood of a) bed blocking, and b) having to move into a care home.

Obviously, social landlords prioritise renters, so for us, and many like us, it looks like we’ll be staying put.

(edited for sp)

All they can do is leave the property to dc
But that's not quite correct for everyone, you are assuming it's all about preserving an inheritance for children. Not everyone is focused on maximising gains for those named in their wills. My property will hopefully afford me the care I may need. For many their property will pay for their care home fees. My step dad was in a care home who currently charge from £6700 each month. But it was a great place. Secure, excellent care and in a lovely environment. Many care homes aren't as good sadly but I'm so glad that he was able to enjoy his last years in a good environment.

About £1.5m, so SDLT of about £140k (additional bit because my wife owns a portion of her parents' small flat overseas, so our home is a second property. Without that, SDLT is about £95k). £300k is realistic for both moves, if we make reasonable assumptions about fiscal drag (i.e. things get nominally more expensive because of inflation, but tax brackets don't increase in line).

I get this is largely a London problem. I wouldn't worry about £4k either, but £300k is a disincentive. Not hyperbole in our case. The thought process was: it would make sense to move, but can we justify paying £200 tax a day for a shorter commute? No, we can't, so we will stay put.

Happy to pay tax (in fact favour a land value tax over SDLT, even though that would probably hit us harder). But when the country really needs to unblock growth and unlock housing, policies that actively penalise people from downsizing are really irksome (same with the IHT benefits for hanging on to property). The govt always seems to be thinking about the most politically-convenient way to tax, rather than the most economically beneficial.

The IHT benefits for holding onto property are indeed mad.

What about renters, who are stuck renting but can’t afford to buy, and would pay more council tax to subsidise home owners Stamp Duty?

I think everyone has accepted scrapping SDLT wouldn’t reduce house prices so it wouldn’t increase the likelihood of them affording a home.

Someone suggested upthread that perhaps Stamp duty paid by the buyer could be replaced by a capital gains tax paid by the vendor

I can see the point as it moves the burden up the chain and taxes the unearned wealth- and since the top end tends to only sell when necesssry it shouldn’t be too much of a demotivator?

Respectfully, whilst I can see your argument, surely you can see that reducing stamp duty , and likely increasing tax burdens on everyone else, so that people in a financial position to buy a multimillion pound house whilst also owning part of a property overseas, isn’t going to be a vote winner..

We were talking about this not so long ago

Maybe it would help if everyone was given one property move free of stamp duty?
It would definitely mean we would consider downsizing... as it is we will probably stay where we are

By this do you mean.
Person dies and family hold onto property afterwards
and don’t sell up immediately ???

You may be right on it not being a vote-winner, but it's an example of where a policy actively drives against what the government says it wants to achieve.

Whether it puts tax on 'everyone else' depends on how the removal of SDLT is funded. There's no reason it would need to be replaced by a more regressive tax (my preferred replacement wouldn't be). But the true burden of SDLT is not in the tax paid, it's in all the beneficial trades that don't happen at all because they are disincentivised. It's the people who can't move near work, who could be using the property left under-utilised across the country. It won't fix everything (we also need a lot more housing to be built -- which would hurt me financially but would be a great thing to see), but SDLT does make things worse.

Virtually every economist and tax expert from all parts of the political spectrum agrees SDLT is a bad tax. Replacing it would aid growth, which the govt says is its top priority. It could be done in ways that aren't any more regressive. If even this is too frightening for them, what hope do we have of addressing the much bigger thorny issues that the country needs to deal with.

14 days? By my calculations, they’ve been in power for over a year.

The BBC reviewed the government’s performance last month following a full year in power and commented as follows:

“But the government's own policies risk weighing down the outlook for the next year or two. The rise in minimum wage has helped millions of workers but that and other policies - such as the increase in employers' National Insurance contributions - are weighing on businesses profits and jobs.
There are more than a quarter of a million fewer employees than a year ago; the biggest losses are in hospitality and retail, among the sectors most likely to have seen their wage bills increase. Analysis of job postings by the Institute of Employment Studies suggests the increased hesitancy among employers dates back to the Autumn Budget as they braced for these policies to be implemented.”

The Labour Party is giving every signal that it is anti business and anti employer, at the same time as saying they are pro growth. The two are incompatible. Rachel Reeves seems to spend more time focused on balancing the books by creating inventive ways to tax people without breaking her fiscal rules (which she’s already broken by introducing NICS) than focusing on growth.

I don’t care about previous governments. I’m looking forwards not back.

Labour and KS told people to vote for them because they were better than the Tories. I simply don’t believe him. A year is long enough to show the public how you’re going to improve things. I don’t expect him to deliver it overnight but I expect him to be a hell of a lot better at showing us what his plans are.

One of the great things about stamp duty is that it should be (at least in theory) impossible to avoid it, as it is a tax on an immovable asset that exists entirely within the UK.

As one of the few taxes it is actually possible to enforce it shouldn't be abandoned.

If anything it should actually be increased. And sellers would have to lower their expectations as a consequence.

People are constantly going on about how the rich should be taxed more, and how tax avoidance by millionaires is rampant. Here is a tax where it is possible to make it very difficult to avoid. But people constantly complain about it.

It's like the government can't win.