Tax association urges changes to Stamp Duty
In its Budget submission to the chancellor, AAT Head of Public Affairs & Public Policy Phil Hall said: “It’s widely accepted that Stamp Duty adds a burden to any homeowners seeking to move – especially first-time buyers – because they must pay the tax as an immediate upfront cost together with finding a deposit, surveyors and solicitors fees and so on.
“This stunts mobility, impacting on employment and productivity as well as reducing the supply of new homes, which adds to the affordability crisis. Switching liability to the seller would be a relatively simple way of solving these problems.”
Hall directly addressed two of the key concerns with the proposal; that sellers would increase their sale price and the effects on older people seeking to downsize.
“In 2014 it was suggested that sellers would pocket any Stamp Duty savings realised by changes to the slab/slicing methods of payment but this didn’t prove to be the case. Likewise I doubt sellers will add the whole cost on to the asking price if they have to pay Stamp Duty. Even if they do, the buyer will still benefit from a lower upfront cost as no tax is payable,” he said.
Where downsizers were concerned, Hall added: “In most cases downsizers will probably have no mortgage and will have significant equity. They’re likely best placed among all homeowner types to pay a little extra, certainly better placed than first-time buyers.
“It could also be argued that once this has been in place for a few years, downsizers are likely to have benefitted from the seller pays regime to have got to where they are on the ladder.”
AAT suggested changing the liability for Stamp Duty would:
- help more people get on the property ladder (by reducing immediate upfront costs);
- help those moving up the property ladder (which in turn should free up smaller properties for first-time buyers);
- increase the amount of house purchases (addressing recent criticisms from both the IFS and London School of Economics);
- maintain substantial multi-billion pound revenue for the exchequer (although those paying will change, the amount will not);
- mean that people moving up the ladder would be paying duty on the lower-priced house that they are selling, not the higher-price one they are buying (improving buyers’ ability to pay).