Replacement of Stamp Duty with Land Value Tax

[AnalyticalChick]

I was reading in Money Week that all the political parties see an ongoing annual Land Value Tax as the preferable alternative to Stamp Duty.. The change is likely go ahead within the next few years. Would MNers prefer to pay Stamp Duty on an initial property purchase, or an annual LVT on the value of their property?

With stamp duty, I saved up before I had children, when I was working full time, when I could live in a bed sit and choose to leave the heating off. Once it is paid, no need to worry about it again.
Mobility has dropped because stamp duty is high but that hasn’t affected employment figures so not necessarily a problem.
An annual land tax becomes another burden, makes it harder to have a family life. Gets added onto rent, for those who rent, making renting still more expensive.
People are naturally resistant to change, but I think this is just an extra tax that will only help the exchequer.

Is the suggestion that it only applies to purchased after a certain date? I damn well don't want to be taxed twice for the same thing.

Land tax would make people more mobile which would probably be a good thing for the economy. I had to stump up about 50k in taxes and fees for my last move and it means I’m very stuck and couldn’t move for a better job for example.

LVT is a much fairer way of taxing the land resources you’re using, and should increase mobility.

People have a massive emotional attachment to the idea of their principle residence not attracting tax though - really capital gains should apply as will IMO.

Would be hard to phase in tho as like Wowfudge says some people will have recently paid tens of thousands in stamp duty, whilst others won’t have paid anything for 30 years.

This could potentially be a disaster for us.
We have just moved to a fairly expensive house, and with two in childcare are at our absolute spending limit in terms of mortgage. Having just paid a significant amount of stamp duty I’d be pretty peeved to have to pay an annual fee to live in a house I’ve purchased and paid a chunk to do so.

What is it?

Came on to ask the same question as wowfudge - we only moved (in London) two years ago, so we paid a lot of SDLT then. I am generally in favour of taxes as a means of organising an economy, but I'd find it harsh to start paying an annual tax so soon after paying a high one off tax. .

I understand the argument about making people more mobile. Certainly I feel we're here for at least ten years to amortise the SDLT we paid as far as possible. However, when people have restricted or irregular incomes, regular taxes can be tougher than one-off payments. We are approaching retirement age with a little capital but no pensions, and accounted for SDLT when we moved because we had a lump sum to work with. If you have a modest income that is only going to fall in the next ten years, then an additional tax - which will presumably be quite high? in that circumstance is difficult.

That's not a problem that's limited to older people, but I wonder if for older people they would charge deferred taxes to the estate when the last owner dies? Or for anyone who finds the tax too onerous, could it be deducted from the value of the house when it changes hands (which would make it like a retrospective tax rather than one that is payable on purchase)?

Surely this will only apply on new purchasers after a set date in the future.

There is no way the government would be allowed to apply this to current owners that have already paid stamp duty on the house they currently own.

OK, have just read two articles about it.
Surely it would replace council tax, not stamp duty?

I don't understand the argument about making people more mobile ;do remember it as an early, and abandoned Blairite policy)

The break up of communities has not AFAIK been shown to have any good effect on society. Mobility in the sense of 'reducing the costs to home owners when they move' is really about preserving the wealth of some.

I wouid prefer to see continuing scrutiny/adjustment to stamp duty.

Remember that Stamp Duty is charged to a small number of people, once for each home they buy.

LVT is charged to a very large number od people, on many occasions.

So if, for example, the government took in a hundred thousand pounds a year, by charging ten people ten thousand pounds each, it would under the different system be able to take in the same amount by charging a thousand people ten pounds each.

Remembering that the super-rich would pay more than the poor, and more than they do today, because very few of them would be able to hide their land in Panama or the Virgin Islands.

Can you guess why the billionaire owners of the mass media are against it?

sorry, "hundred" not "ten"

But you get my point.

I disagree with stamp duty and land tax. People pay income tax on earnings - they should be able to buy a house (which is an essential purchase, not a luxury item) without the govt getting another chunk of tax out of them. The only way imo you could argue that house purchases should be taxed is if there was enough council housing available for everyone who wanted one (thus making home ownership a choice rather than a necessity) or if a person owns more than one property.
Taxing people on owning a home is fundamentally wrong imo.

they should be able to buy a house (which is an essential purchase, not a luxury item

Essential? I'm not sure most property purchases are done on a purely essential basis.

Taxing people on owning a home is fundamentally wrong imo

I disagree. I don't have an issue with people being taxed on the resources they are using/hoarding.

We pay tax on energy, petrol, food, water.. . Tax on essentials isn't a unusual thing.

Presumably those who have recently paid stamp duty would get a Land Value Tax grace period of a few years before starting to pay the tax. Those who bought years ago probably paid very little stamp duty and their homes have increased in value since then.

I spent a lot of time working on this professionally.

I would say LVT is huuugely preferable over SDLT but I just can't see the political will being there for it as it would create many losers as well as winners.

I think it's also logistically much MUCH more difficult to administer than people are currently giving credit for - land is much trickier to value, the whole stock will need ongoing revaluation. With SDLT the valuation is happening anyway. The amount of resource needed to periodically revalue only commercial buildings is already massive - maintaining accurate and defensible land values would be hugely more than that.

@NellWilsonsWhiteHair Money Week says all the political parties are now openly discussing it at Westminster, and it is seen as the surest way to tax wealth, because houses cannot be moved to tax havens.

I really don't get how it would replace stamp duty. Surely it is just another form of council tax based on land rather than house?

@LuluJakey1 I don't know if it will also replace council tax. I think the government needs more money than it is currently getting, so it will probably be in addition to council tax.

There are already examples of double taxing - inheritance tax, for example. I would rather pay a bit more tax on my earnings tbh and boost central funding that way.

@wowfudge The climate in Westminster has apparently moved towards the taxation of wealth, and housing wealth cannot be moved overseas and the tax avoided. I believe a land value tax has been discussed for centuries, but only now is the political will for it firming up across the spectrum, probably because so much wealth is stored in houses, which have increased substantially in value.

According to Money Week who have been banging on about for years.

@wowfudge They held a round table of property experts, who all agreed it is coming down the pipeline.

The best way for the government to make more revenue from housing is charge capital gains tax on all house sales... including private residences.
The lack of cgt on principal residences is ridiculous, it is by far the biggest form of unearned and untaxed wealth creation