Ridiculous stamp duty costs

[Ffsman]

No stealth boasting, one upmanship etc. and I know it’s first world problems.

We have a relatively expensive house, but only because the area is expensive, it looks very average and truly unremarkable. I don’t actually earn that much, the house is certainly more than 5x our join salaries.

We’d like to move, but the stamp duty amounts are horrendous, above around 900k it really goes up and above 1.5m and you’re paying 12%.

We’d like to move slightly out, around 15-30mins walk from the city centre which will give us a little more space, price will be around the same as ours give or take a couple of hundred thousand.

I’m struggling to come to terms with just how much we’ll lose in stamp duty.

The people in my position, did you just do it? Stick where you are? Etc

Also I can’t afford to keep moving, one bad neighbour who makes our lives hell and we are screwed.

We have no realistic option to extend our current house. Its city centre and the plot is good but small.

Any thoughts?

Let’s hope they are reading. Rachel - how about it?

discount for downsizers 👍

But that would never work as it could never be accurately accessed.

You might own a 4 bedroom house and decide to swap for a London or city centre flat of the same value, just smaller.

You might swap from a city centre house/flat and swap to a suburban bungalow with marginal price difference.

If I want to swap my current house for a bungalow there's an increase in price in my market town and not a decrease. Bungalows carry a price premium hence the higher price.

This exactly. We completed just before the Covid stamp duty relief kicked in, which was obviously annoying. But I always keep an eye on house prices locally, and prices actually went up more than the Covid relief technically gave buyers back as a tax break, people just factored in into their budget. It created a bit of a feeding frenzy local to us, and drove up prices, and they've never gone back down. I did the sums, and we actually saved money by paying full whack stamp duty!
To answer your question, yes, we just budgeted for it and sucked it up.

I agree with what you’re saying. But if the price is substantially less? Could that work somehow?

It's a thought but I don't think it would be popular, except with the older generation. I think it would be deeply unpopular with younger people, who are being expected to pay far higher prices relative to income and much higher taxes as well. I think gradually removing stamp duty and introducing a proportional property tax, perhaps gradually rising after 1-2 years would be fairer.

but surely the younger generation would benefit if more oldies (inc me) downsized. Anything to get things moving.

It could definitely indirectly be of benefit to some younger people but the direct benefit would be going to 'the oldies' when they have already benefitted from the huge rise in property prices in many areas. It would just seem like more handouts to older people at the expense of the young.

I suspect the thing that would actually work would be American style property taxes, but its definitely a lot less 'carrot' and a whole lot more 'stick', so would be deeply, deeply unpopular with older voters and would never get traction. It would incentivise older people living in bigger houses to downsize to avoid a big tax bill, and wouldn't fall as heavily on the shoulders of younger home owners because they tend to buy and live in smaller, cheaper starter homes.

I e thought about that actually, but then you have to declare rental income to HMRC and it all gets complicated.

Yes we are in that position too. Want to move to be closer to family but the eye watering high cost puts us off.

‘give or take a couple of hundred thousand’.

😂

I think the property tax would be awful as all homes keep going up in value and it would start to affect younger generations as well

My house has gone up ridiculously but we are still not rolling in money. I just happen to live in the South East.

We never had any money when we bought the house and we will need to spend money moving and what we buy will be just as expensive so it's just on paper.

I agree all of this.
@suburburban I doubt that property prices will continue to rise, possibly in nominal terms depending on what happens with the £ but not in real.
If anything, a property tax would add to downward pressure on prices, especially large houses/ in expensive areas. Demographic changes also exert downward pressure over the next 20 years. Then there are the upcoming economic problems too.

But it's very progressive. The people with the most wealth or who have lucked into the most wealth pay the most.

It will help moderate prices as people won't be happy to see their house prices rise if it means a greater tax bill.

But your point is well made. Many people are living in the wrong homes - either size or value - and that's why I would give a 5 year warning. This would allow them to rightsize before the tax commences.

The Home Value Tax might sound scary but it needn't be. Here are some rough figures.

The current SDLT generated £15,250M in 2023 (that's what needs to be replaced)

The value of UK Housing Stock is estimated to be £8,678,000M.

A flat 0.25% annual charge on that could generate £21,695M per annum. That's a little bit higher than needed but allows for uncollected tax and price variability.

That would mean the following annual taxes on homes of these values:
£250K would pay £625 annually,
£500K would pay £1,250 annually,

£1.5M would pay £3,750 annually, etc

..... and no more stamp duty on future purchases.

I don't get this whole theory that "oldies" would be helping anyone by downsizing - surely all it would do is increase competition in the market for smaller homes that are typically starter homes, pushing prices up for everyone and pushing owning a home even further out of reach. Unless you plan to knock everything down and start again with a load of communist blocks of exactly proportioned out properties that are divvied out as to your need, it's better to have people spread across the full variety of housing stock out there.
Honestly, I think that kind of talk is mostly motivated just jealousy trying to hide under a false flag. It's a case of "I don't have it, so you can't have it either."

@XVGN I totally agree with that way of doing it

I don’t see that near us - it seems to be lots of couples with toddlers wanting a bigger house and then there being none to buy. It prob depends on your area and demographic

Definitely sensible to gradually phase SDLT out and a property tax in over time to give people a chance to adjust if they choose to move.
I suspect it would end up being a lot more than 0.25%, especially if it also replace council tax, which is a very outdated system too. The property taxes are much higher in the US but I don't think they have a tax on moving home.

You're not responsible, but check your privilege and pay the taxes. Younger generation are subjected to every bit of tax from already heavily taxed salary, so nobody is sorry for you having to pay stamp duty from winning a lottery aka property boom. And may I remind you that neither of us have final salary pensions either.

Just sucked it up. Haven’t thought about it since.

I'd be well hacked off to pay a wodge of stamp duty and then be clobbered with a property value tax as well a couple of years later.

@Wanderergirl So my choice is to move from a house that I have worked hard on, updated, insulated and where I am happy, and close to my friends, to a smaller house where I don't know the history, have no way of knowing the running costs, away from my friends, disrupt my life AND make no financial saving.

Obviously no-one would do that. There is no benefit. Plenty of risk.

I don't mind staying put. It is the govt that wants larger houses to be available to families.

Since neither you nor I have final salary pensions, I'm unsure what that has to do with anything.

@shockeditellyou well that's easy to sort- it's payable ongoing on new purchases where you then don't pay stamp duty surely - I can't think that's complicated to implement

A property value tax is an interesting proposal. Council tax would need to be rolled in, and is very variable across the country, so could be some awkwardness.
I wonder if it would create some unintended outcomes? Maybe councils would make the area 'nicer' to push up house prices and tax income. That could be a benefit for infrastructure and public services. But I wonder if it could incentivise more flats over houses (or vice versa) to get higher tax income. The biggest challenge might be that the tax revenue in deprived areas would be lower than in wealthy areas so the gap widens.