01 December 2014
Nationwide Building Society is calling for reform of the Stamp Duty Land Tax system, asking the Treasury to provide a lifeline to ordinary buyers facing a Stamp Duty bill for the first time, as well as those at risk of tipping into a higher duty band as they move up the housing ladder into a larger home.
House prices in the UK have increased by an average of 18% (to Q3 2014) since the 1% Stamp Duty threshold was last increased in 2006. Despite these rises, the thresholds at which buyers are required to pay increasing levels of Stamp Duty have remained the same.
As a result, according to recent HMRC figures, nearly 70% of home movers now pay Stamp Duty, compared with less than 50% in the late 1990s, and leaving many ordinary homeowners, who have seen property prices rise, in danger of facing such a significant up front cost that many are put off moving altogether.
Had they kept pace with house price inflation, the minimum thresholds at which Stamp Duty is payable would have increased at 1% from £125,000 to £145,000, the 3% threshold would have risen from £250,000 to £295,000, the 4% threshold from £500,000 to £590,000 and the 5% threshold from £1,000,000 to £1,180,000.
Current Stamp Duty Thresholds
Current Stamp Duty Thresholds
|£125,001 to £250,000
|£250,001 to £500,000
|£500,001 to £1,000,000
|£1,000,001 to £2,000,000
|£2,000,001 and above
In a letter to George Osborne, ahead of his Autumn Statement in December, Nationwide has urged the Chancellor to consider reforms to Stamp Duty including raising thresholds to better reflect house price inflation and to stimulate market activity.
Nationwide’s Chief Executive, Graham Beale comments; “Stamp Duty now impacts tens of thousands of people every year, incurring a bill of almost £2,000 for those buying a home at the UK average price of £190,000, with the cost increasing threefold for properties costing more than £250,000. Our own figures demonstrate the distortion that the current slab thresholds create and highlight the fact that a sale price even £1 over each threshold can result in a hugely inflated bill. This additional cost may even be discouraging some from moving altogether.
“That’s why I have called on the Chancellor to review the current system. We need Stamp Duty thresholds increased to better reflect rising house prices, as well as the introduction of an escalator so that those thresholds continue to adjust automatically in the future. This would make Stamp Duty clearer and fairer for everyone.”
When considering that more than half of revenue now comes from purchases over £500,000, according to the Office of Budget Responsibility, such reform would not necessarily create a significant impact on the revenue the tax generates. In fact, keeping Stamp Duty unchanged could even be considered a contradictory situation when compared with the financial assistance the government is providing through Help to Buy.