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?

You already made profit on it, not sure what more of a saving/incentive you are looking for?

What about all the young people who have benefited from an inheritance or "bank of mum and dad" and are able to own properties out of proportion with their annual wage? What about couples that buy with a mortgage based on two-salary income, but then one stops working (at least f/t) to bring up children? What about all those people that were struggling when interest rates went up and were just about holding payments together to keep their homes. Would it really be fair to slam an additional annual tax on them just because of the value of their home? It's a horrible idea!

Please don't go on about check your privilege nonsense

It was normal to buy your own home in the 90s, it's only because of government policies the housing has become so expensive

Yes it would, that way house prices would be more proportional to the income, people now live in houses they cannot afford and cannot afford to look after them properly. Makes zero sense. Property is part of the individual wealth calculation and should be taxed past the certain point in my opinion. Not talking about people in cheap family properties who are on low earnings. Sorry, but if you live in 1.5-2m house, I don't feel any sympathy for you despite your circumstances. If you cannot afford this lifestyle, downsize, simple.

I guess it is time for new gov policies to regulate the prices now, and the only way to do it is higher mortgage interests and higher taxation on assets.

So as per usual the middle are squeezed

I'm middle, but don't live in 1.5-2m property. New generation even on very high income can't afford big family homes anymore.

Agreed, but I didn't want to go down the whole poll tax rabbit hole as it brings up memories of how it was incorrectly levied under the Thatcher government.

But yes, the poll tax would be paid by voters whether they owned or rented (this replaces the council tax) while the HVT would be paid by owners only including landlords.

Together, a higher HVT plus a lower Poll Tax could replace both SDLT and Council Tax.

But then you have to pay tax on the rental income so maybe not worth it plus the all aggravation of being a landlord, ven if you use an agent.
Also you have to find a decent rental and there's not many around.

@Wanderergirl

Nor do I

Stamp duty is the worst of all the taxes. In particular because you could need to move house quickly after you buy, but get no refund and have to pay it again. Imagine paying £100k tax to only live in a house for a year!

I would ditch it entirely and fund the tax loss with a new ongoing charge for new purchases. I would cover any gap in funding by reducing the threshold for paying inheritance tax (since much of inheritance is from untaxed housing growth anyway).

You just plucked 1.5 -2M out of the air though.

The middle live in family homes worth about 750k, in the South East, excluding London. Middle in other areas will live in houses worth less than that. I think if you choose to live in London you accept that 500k buys you a flat, so does 1M in some areas. No one feels sorry for young Londoners saying they will never be able to afford a 1.5 -2M family home. The answer is move somewhere cheaper.

Older people have already paid high stamp duty on their big family homes. So there would be even less incentive to downsize if they would need to start paying new annual taxes on the new, smaller home. I think it would just encourage more older people to just sit tight for longer in big, unsuitable houses.

If you want older people to downsize you need to incentivise them to do so. Which would be unpopular with younger people who feel resentful towards them anyway for being lucky with house price inflation so nothing changes.

Poll tax was so deeply unfair and hated that it helped to bring down the Thatcher government so that’s not the answer either. It’s fairer to pay council tax where people in bigger properties pay more.

I actually think stamp duty is fair because the richer you are the more you get taxed. To me it’s fair that someone who can afford a 600k home for example pays more tax than someone buying a 300k home. I think Labour should have extended the higher threshold before you need to start paying stamp duty though, to help FTBs.

Of course some people get shafted on stamp duty ( like the example given above of someone who pays 100k then has to move again after a year) but that is highly unusual. There is no tax that is 100% fair to everyone regardless of personal circumstances so all governments can hope to achieve is taxes that are generally seen as fair.

And going back to the OP @Ffsman we did move from one expensive house to another a few years back so I feel your pain re the high cost of stamp duty. But at the end of the day, we swallowed it. Which is what I’m afraid you will need to do too if you really want to move.

What a ridiculous thing to say!

That sounds like a terrible idea.

That could be a huge amount to find out of income (when SDLT can come out of equity) every single year regardless of your circumstances.

For example, couple with children buy house based on the fact they both have a good income. Husband falls seriously ill with cancer and is suddenly unable to work. Wife has to give up work to care for husband, and maintain care of house and children. Couple have to go on benefits. Under huge amounts of stress so not in a position to add buying/selling a property into that mix. Now having to find a large property tax payment on top of the mortgage they can't afford. This is not an unusual scenario btw. I came across this multiple times when I worked with cancer patients. You could replace with any other serous illness which can go on for years and years way after any emergency fund or sick pay has run out.

There are also other people who asset rich but cash/income poor who are unable to sell their homes for various reasons: negative equity, unusual construction types, cladding issues, needs essential work they are unable to do. Or personal or medical issues that make going through the buying/selling process impossible for them.

Then of course there are the homes which are owned by a couple who have split up and one has moved out. Who has the liability then? I've seen cases where the partner who hasn't moved refuses to sell. Obviously you ca take them to court but that can be costly (and some don't have this monthly) and take a long time. Plus what do you then do when they just don't allow anyone in to view? Or centrally call the estate agent and tell them to take the property off the market. Again yes I've seen this all happen.

Im sure there's plenty of other scenarios I haven't seen or thought of.

You can't assume that everyone is able to downsize or move at the drop of a hat/change of circumstance to reduce a property tax liability. Sometimes it's way more complicated than that.

What can anyone say, stamp duty is a lot because it's a percentage and you are looking at expensive properties.

Either you pay it or you stay put.

But it wouldn't be 0.5% as the discussions are about it replacing stamp duty and council tax. OBR estimates council tax will raise 47bn in 2024-25. Stamp duty receipts have been between 15bn and 20bn in recent years.

It would need to raise at least 60bn a year and they would possibly want more than that so more like 70bn a year. It's more likely to be close to 0.75% a year based on your figures. That would see the south east getting absolutely hammered again.

Also, rebanding/valuing council tax replacement would hammer loads of people. Revaluing a band a flat to modern prices would immediately move most cheap properties up by about 4 bands, and means people would have to pay hundreds extra a month. It’s the relative prices that matter.

I agree it’s the relative prices that matter.

They could update the price bands which are based on old valuations but I think most people feel they pay enough council tax.

"Older people have already paid high stamp duty on their big family homes."

Older people may want you to think that or may have difficulty recalling the Stamp Duty regime prior to Labour's SDLT introduction in 2003.

For example, a typical £1.5M semi in London today may have been purchased for less than £250K in the early nineties. Stamp Duty then, if I recall correctly, was 0% on properties up to £250K.

What about people who bought in the past ten years or so?

Older people may genuinely have difficulty recalling tax laws prior to 2003 - it was over 20 years ago!

Ok consider my above sentence edited to include the words “if they bought the house since 2003”

If they bought an expensive house they paid a lot of stamp duty.

The easiest way to think about HVT and Poll Tax replacing Council Tax and SDLT is to consider a pair of semi's. In one half a single pensioner owns their home. In the other half a family of 4 adults rent.

The pensioner pays 1xPoll Tax plus 1xHVT. Each adult next door pays 1xPoll Tax only - the household pays 4xPoll Tax. Their Landlord pays 1*HVT.

It would be up to government to set the appropriate rates and allowances, but the "new" poll tax should be nothing like the levels of the "old" Thatcher poll tax. The difference would be made up by the progressive rates charged on HVT.