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.

We’re in Scotland and while it’s quite demotivating to me that we will have such a large sum to pay to get the house we want in the next 3-5 years, it really sucks for the elderly.

my in-laws complain about stamp duty so don't want to downsize. They bought their home for 60k & it's about 1.8m now, I think stamp duty sucks for me more 😆

The average person moves every 16.5 years. So I’m guessing by the time most people reach a downsizing need it would be too late

I do think FTBs who are older should often skip the flat stage as the concept of the ladder doesn't really work now.

Why would it aid growth ?

If stamp duty were removed, why would property sellers not just put their prices up more ?

If all parts of the political spectrum view it as a bad tax it would be gone by now.

It’s the fact that we are being penalised for moving that is mad.

That’s like saying fuel duty penalises people who drive, or duty on alcohol penalises people who drink - people make choices about what they buy and are taxed accordingly. Spending £500k on a house in Scotland is more of a choice than elsewhere in the UK, proportionately the tax is a small part of the overall cost.

Person dies. If they don’t leave a property (because they have sold up to go into a home) their nil rate band is £325k. If they pass on a property and cash it’s £500k. £70k better off if you pass on a property rather than the proceeds of the sale. So the elderly person in a care home’s house lies empty to ensure it’s in her estate on death.

People are constantly going on about how the rich should be taxed more,

Some people are constantly going on about how the rich should be taxed more. There is a howling silence from some quarters.

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.

To be fair every move they’ve made to reduce state dependency has been met with howls of rage. Everybody wants something and nobody wants to pay for it. And it was too frightening for the Tory government too, no one has a plan to reduce state dependency, improve public services or pay for the ever increasing public public purse.

The issue Keir Starmer has is that some of his rebel MPs have a strange grip on economics. After the welfare bill was filleted a rebel MP was overheard saying that they couldn’t see what the big deal was, the country can always just borrow more.

There are some people - admittedly mistaken - who believe that having somewhere to live is not a matter of choice. Still. we'll learn 'em, eh ?

It’s shit for people who are forced to move. My husband had an affair and left me, and I can’t afford to buy him out of our house so we have had to sell it. It’s been an unbelievable stress to find somewhere vaguely near their school I can afford on a single income without handing over £27k to the government as well.

Yes, I know I’m lucky to be able to buy a house. I know there are those worse off, but it very much felt like being kicked when I was at my lowest point.

Having somewhere to live is essential, in the Scottish market spending £500k on somewhere to live is a choice. I’m in a nice area, 4 bed detached house which is valued around £300k, with some exceptions, housing is generally much more affordable north of the border.

Yes, fuel duty penalises people who drive, and alcohol duty penalises people who drink. The rationale in both cases is that driving and drinking both create costs that are borne by the rest of society. The tax serves a useful purpose of making the person who makes those choices compensate for those costs.

SDLT penalises people who move property. But moving property doesn't impose a cost to society. In fact, it's socially helpful, increasing housing supply, allowing people to move easily for work, to move out of rented property without having to make a big forever bet, etc. So SDLT is has the opposite effect of what we are usually trying to do with transaction-specific taxes. It penalises the socially useful thing.

In Edinburgh? £300k??? Nice? You have got to be kidding.

Well there is a society cost associated with the housing market / the inflated values is costing us all dear, it’s raising the costs of necessities like childcare to unaffordable levels so there is a negative side to the housing market

Stamp duty? What about this monstrously stupid phenomenon called leasehold? It’s some kind of exploitative practice from the Middle Ages, a feudalistic heritage.
I swear Britain is the only country in the world where you buy a flat and basically you rent it on the long term for 100-900 years! It sounds like a lot but at the end of the day you (your family) are just renting it and it’s never fully yours. Anywhere else in the world you buy a property and it’s yours forever. FFS! This country needs a revolution! 😤

I never said I was in Edinburgh. But yes living in Edinburgh is a choice.

Yes, fuel duty penalises people who drive, and alcohol duty penalises people who drink. The rationale in both cases is that driving and drinking both create costs that are borne by the rest of society.

Has any government ever actually stated that ?

As far as i know the "rationale" is that if you can afford to drive, or drink, then you have too much money and the government is only too glad to help you solve that problem.

If your assertion was correct we would see (for example) fuel duty being spent on roads ....

Leasehold isn’t an issue throughout all of the UK, doesn’t exist in Scotland but yes it’s ridiculous.

Mysteriously, the word "fleecehold" never took off. A paranoid person might conclude that's because the media is on the side of the freeholders.

Because SDLT suppresses transactions, which reduces labour mobility, slows downsizing, and keeps empty housing off the market. Improving labour mobility, increasing housing supply, and making it easier to move to a property that suits your current (not past) needs is a direct productivity gain.

In economic terms, preventing transactions that both parties would have benefited from is a deadweight loss. Both parties lose out, and no-one has gained. That's the main harm from SDLT.

If SDLT were removed, sellers would put their prices up. But evidence from various countries shows they put their prices up by less than the SDLT cut. In other words, the the saving gets split between the buyer and seller. It doesn't all go to the seller.

But even if it did all go to the seller (which it doesn't), scrapping SDLT would still be beneficial. Why? Imagine the waiter gave everyone at your table the wrong dish. Would you benefit from swapping them round? Yes. Regardless of whether the restaurant knocks something off the bill.

As for consensus. Not everything that makes sense happens in politics. Quickly looked up think-tanks that oppose SDLT: New Economics Foundation (green/progressive), Institute for Fiscal Studies (centre-left), Centre for Policy Studies (liberal), Institute of Economic Affairs (free-market), Taxpayers Alliance (right wing). The OECD judges it to be more harmful to growth than income tax, corporate tax or consumption tax. It's a bad tax.

This is a far more sensible idea than wealth taxes.

However what about people who buy cheap homes and then massively improve them. Working day in day out toiling away to make gains. That’s not fair on them either really.

Why is the cost of childcare affected .
Agree overheads re mortgages on nurseries would be higher but I’m not convinced that’s why some childcare is nearing £1700pcm
That's down to ni increases, staffing ratios, salaries and insurances. Our nursery owners bought the property years ago. Stamp duty and property price had nothing to do with the fees.

Only fairly recently set up nurseries could be marginally affected

Oh for what it’s worth, I agree it’s a terrible tax - just that the reality is that any replacement would likely not be nuanced and would result in a higher tax burden for everyone else.

I agree if you increase the size of your habitable space and earn over and above the standard % increase you should pay capital gains tax.

Just upgrading and adding a new kitchen etc would not be cost effective to Hmrc.