Stamp Duty Land Tax ‘Damaging’ To The UK Housing Market

Posted: 1 November 2017

To Let Sign Outside A London Townhouse

A new report from the Adam Smith Institute has called into question the validity of stamp duty land tax, saying that it should be abolished in order to boost economic productivity, employment and growth.

The paper explained that the housing market is being gummed up by stamp duty on house sales, which is having a knock-on effect of preventing people from relocating for work and also keeping people in properties that are simply too big for their particular needs.

It was found that stamp duty is about four times more damaging than income tax and almost eight times more than VAT per pound raised. This particular tax actually costs British people £12 billion a year – which means it may cause up to £10 billion worth of deadweight losses.

Although the lack of new houses coming onto the market at the moment is actually the biggest cause of the housing crisis, stamp duty stops the current housing stock from being used in the most efficient way. For example, older people are left unable to downsize once their children leave home which means that new families are unable to buy bigger properties.

Executive director of the Institute Sam Bowman said: “Almost any way of clawing back the money will do less damage than stamp duty does: it’s worse than council tax, income tax, VAT, and even corporation tax. Caution is a virtue—but complacency is not—stamp duty has had its day and should be consigned to the dustbin of history!

“Stamp duty is the worst tax we’ve got, almost as bad as setting fire to the money instead of raising it in tax. The reason is that Britain’s productivity problem is in large part a mobility problem. People cannot move to where the best jobs for them are because the houses aren’t being built, and that’s made even worse by stamp duty keeping older people in family homes that are too large for them.”

Stamp duty must be paid on property or land over a certain price across England, Wales and Northern Ireland. The current threshold is £125,000 for residential properties and £150,000 for non-residential properties and land.

It is possible, however, that you could be eligible for tax reliefs in some situations, thus reducing the amount of tax you have to pay. You also don’t have to pay land tax or file a return if, for example, the property is left to you in a will, it’s been transferred because of divorce or the dissolution of a civil partnership, or if no money or any other form of payment has changed hands for property or land transfer.

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