Stamp duty legislation change …

[ohpoowhatnow]

With the new ‘leaked’ news that Rachel reeves has plans to abolish stamp duty and move towards a property value tax, would you hold off moving ?

Our house has literally just gone on the market and we haven't found a house yet …. But the removal of stamp duty would save us approximately 25k. Do you think this will be announced in the autumn budget? And if so how long would it take for the legislation to go through ?

Thanks. I thought that if delaying it by literally a very few weeks meant a possibility of saving 11,500k, it was worth the delay. But I may well be looking at it too simplistically.
We're not likely to have a completion date before first week of October anyway.
It would help if there was a date for the budget.
We've sent a message to ask our solicitor but he's away until next week - I only clocked this issue yesterday so I'm trying really hard to get my head round it.
I don't know if our vendors have clocked it yet either.
We're not time critical in any other way - retired couple buying from retired couple, our house sold already and we're in a rental we can give 6 weeks notice on - so I now can't help feeling it's wiser to wait.
But I don't understand the liklihood of this happening or not.
Maybe no-one does though.

No risk. In short this has been a long and tedious house buying tale, and our vendors don't want to lose us any more than we want to lose the house, and in the context of the last nearly a year an extra 3 weeks is nothing. Especially if it makes both parties richer to the tune of 11,500k.

I feel very conflicted about it.

Stamp duty is stopping me from moving, as it would be a six figure sum to get the house we’d like.

But - the annual property tax which might replace it might be £10K+ a year… which you then can’t es ca e from.

Neither feel like good options. I have a young family and it’s unexpected that I’m going to intentionally stay in a smaller house for tax reasons alone but… here we are.

It's a wealth tax. If lots of people like you also feel that they cannot afford to pay it, or they are opposed to paying it, then it will shrink the market for that property and have the price moderation effect that will benefit people in the long run.

6 figure SDLT means a property costing >£1.3 million, so yes, the tax changes are targeted at the "wealthy"
whether the annual tax charge would apply to a "modest" value of 1.3 is unknown since the "mansion tax" tag is already being talked off and 1.3 is not a "mansion"

My understanding is that an annual property charge would potentially be applied to properties >£500k at a variety of rates based on value.

Sadly I don’t have lots of wealth, just a big mortgage and in an expensive part of the country…!

sorry my mistake, yes >500k

but no if your income can stretch to a mortgage on a £1m property then you have wealth (but for now the bank partly owns that wealth)

You have a high income, so the ability to accumulate wealth - but I wouldn’t say you have wealth.

The person in the £1.3m house who bought it for £200k twenty-five years ago (feasible growth round here) and has no mortgage is in a wiiildy different position to the person paying a £3-4k+ a month mortgage to own the same property.

The person paying the mortgage will already be paying very high tax rates on the income used to pay that mortgage.

I think the policy is really about trying to get a bit of the accumulated wealth of the long-time home owner, not the heavily mortgaged young family. Hence the CGT suggestion too (which I suppose targets that better- albeit, many problems with the application of that too).

I agree with this. Although for those who can’t afford the lump sum an option to pay in perpetuity
There are benefits to the public purse to receive lump sums

In my mind property wealth starts at >0 and should be applied fairly (not at escalating rates) on all property >0. Using an arbitrary £500K trigger is stupidity.

I agree
However this is how Governments keep the complaints down
If you’re not affecting the majority the minority are silenced

Yes - and of course these thresholds are often frozen for years so they become even more nonsensical.

Some degree of taxation based on valuation I agree with - but i do think this unfairly penalises people living in more expensive parts of the country, where property is more expensive (and so costs more of their ko thou income anyway).

It's reasonable to consider the asset rich cash poor widow. Here I'd allow the tax to be deferred as a charge against the property, indexed appropriately, and repaid on death.

So basically capital gains tax and inheritance tax on death

If a couple bought a property for say £500,000 and died when it was £1,500,000 ( many parts of London quite easy to get to those figures )
There would be a bill in the order of
£435,000 assuming the cgtax isn’t offset from the IHT and if it was then the bill would be approx £335,000
obviously impossible to pay cgtax prior to IHT though as it’s based on sale prices

I think this scenario might appropriate on second or investment properties as currently you don’t pay both taxes on death.
I don’t agree they would be on your primary residence
It’s basically, in financial terms, just a huge hike in death duties.

Personally to get more properties onto the open market I think a 200/300% council tax charge for second homes would be appropriate.
Including those second homes used as Airbnb's etc.
If they aren’t occupied for a certain period of time ie perhaps less than half the year

Ex London council houses and flats go for well over 500k, the irony!

I also think a much higher stamp on second homes.

Currently it’s 3% I believe

In 2021/2022 there were 800,000 second homes sales
The number dropped slightly and averaged 2% of all sales but is now on the rise again. Most sales are in coastal areas.

That’s 800,000 homes that could go to people who don’t have one. So I’d raise stamp duty to 30% ( random why not figure ) to stop that.

We're getting into the detail here. Off the cuff, I'd exclude the primary residence from CGT and IHT, but the accumulating deferred HVT would still apply. It's the owners choice to defer. Alternatively, they could choose to downsize if they wanted to reduce their HVT.

HVT ??
googled
It means high value target ?

I suspect you are right that the government would like to tap into the accumulated and so far untaxed wealth of the older property owner.
If you are looking at paying over £10,000 in property tax, @MidnightPatrol, you must be looking at homes in excess of 2 million so presumably have v good equity and income. It could be a positive thing for you if this high tax was imposed as it would mean that less people would make the choice to upsize, then lowering the prices of these homes over a fairly short time.
As I said above, I wonder if they will attempt to introduce more than one type of tax on the property so they can tax some of the property inflation gain and increase taxes on the actual property or land. I don't agree with deferring the taxes for a long time though @XVGN or, if they do this, they should discourage it by increasing the amount if you choose to defer. If they could lower prices gradually and also encourage right sizing in terms of property, ie families living in family sized houses, elderly widows living in smaller houses, as previously, that would make a lot of sense. As it is, things are the opposite now because younger people can't afford larger houses in many areas, unless they have large gifts from older relatives.
I also agree with suggestions re higher taxes on second homes and not having arbitrary cut offs.

I assume @XVGN means 'home value tax', @DrPrunesqualer

Home value tax.
Is that the proposal to replace Stamp with a yearly payment ? Based on property value when you buy

I haven’t seen anything called Home Value Tax in the news other than the above

Of note your comment re the size of a property should equate to your needs

Its interesting that there is a discount on Council tax if you live alone so the system works against this theory
So perhaps that should be abolished

As someone who lives in Scotland, looking to move this autumn, and subject to LBTT, I am also intrigued what would happen up here should England push through changes.

As it stands I would pay the following on the £395000 house I am looking to buy:

England & Northern Ireland: £9,750
Wales: £10,200
Scotland: £12,850

I wonder if Rachel is eying up the increased amounts paid in Wales and Scotland and looking to narrow that gap...

Agree. That £3k is increase would make a big difference