UK house prices: Stamp duty – unless we’re still at war with France, it should go
Stamp duty was originally introduced as a temporary tax in 1694 by a weird coalition of Dutch and British Monarchs, to maintain the war against their French foes.
The duty then lay in the background until 1997, when Gordon Brown‘s first act as chancellor was to resurrect it.
Brown’s master plan was to impose a 1.5 per cent grab for home purchases above £250,000 and two per cent over £500,000. These thresholds, and the standard one per cent above £60,000, remained static for years, even while house prices increased and therefore achieved a brilliant example of fiscal drag.
Then Brown increased the tax thresholds again. The worst of it was that the higher thresholds were retrospectively applied, which meant a property at £1 above each trigger point resulted in the higher rate being paid on the entire purchase price. As a result, the Labour Government took £6.5bn from home buyers throughout its tenure, as opposed to less than £1bn each year before.
Instead of lowering these thresholds in 2010, the new incumbent, George Osborne, immediately raised the stamp duty rate for high-priced home purchases – although he did, at least, do away with the retrospective element.
Stamp duty today now absorbs from two per cent to 12 per cent of purchase price, the latter applying to a significant number of London purchases now that it penalises above £1.5m, which is just about every three-bed semi in London. It’s a tax on the South East.
Stamp duty earned the exchequer £9.2bn in 2013/2014 and is expected to hit £11bn in 2015/2016. Gordon Brown should be proud of his legacy.
Next month, an even greater imposition will be applied, battering those buying properties to-let or as second homes. You’ll pay an additional three per cent for the privilege of such ownership.
I have never understood why stamp duty is imposed upon home buyers rather than home sellers – those who have enjoyed the profitable spoils of their fast appreciating asset.
For real fairness however, stamp duty should be repealed altogether. After all, 322 years is a tad more than temporary.
In the absence of common sense and total fairness, a one per cent rate for all sellers is the next most equitable thing and would still bolster Osborne’s pockets to the tune of £3bn each year.
The British home buyer has suffered enough. In my view, it’s time to let hardworking home buyers off the hook.