Home Finance Hunt plans to cut ‘Britain’s worst tax’ – instead he should axe...

Hunt plans to cut ‘Britain’s worst tax’ – instead he should axe it and get UK moving again

There’s a lot of competition for the title of Britain’s worst tax. In my view, the stamp duty land tax is right up there. It forces people to pay thousands of pounds to the Treasury when they’re already at full stretch buying a property.

Stamp duty often flies under the radar – until you move home and discover how much you have to pay.

The levy kicks in at five percent on any part of a property price above £250,000. It then jumps to 10 percent on any price above £925,000 and 12 percent above £1.5 million.

It adds £12,500 to the cost of buying a £500,000 property, rising to a punitive £25,000 for a £750,000 home.

Residential landlords and second homeowners face a three percent surcharge on top of that, while overseas buyers must pay a further two percent.

Property experts hate it, with David Hannah, group chairman of Cornerstone Tax, calling it “one of the most complex and least understood taxes of all”.

Stamp duty is also a tax on mobility, making it harder to move home to find work, and deterring older “empty-nest” homeowners from downsizing somewhere smaller, cutting the flow of family homes to the market.

However, it does fill Treasury coffers, generating more than £15billion in the 2022/23 tax year. That’s more than double the annual inheritance tax take, yet IHT attracts far more ire.

Now Hunt is holding out the carrot of a stamp duty cut in the run-up to this year’s general election.

He’s considering lifting the threshold at which stamp duty kicks in from £250,000 to £300,000 in his pre-election autumn statement.

This would lift roughly half of homebuyers out of the tax but cost HMRC £3billion a year by 2028.

When Rishi Sunak launched a stamp duty holiday while chancellor during the pandemic, sales soared. Whether buyers saved money is moot. Many vendors simply raised prices to match.

Karen Noye, mortgage expert at wealth manager Quilter, said Hunt’s proposed cut would save buyers up to £2,500 and reignite property sales. 

The property market needs a lift, as residential property transactions have plunged in recent months as mortgage rates climb.

Yet Hunt’s cut will do nothing to help struggling first-time buyers, who pay no stamp duty on properties up to £425,000. It could even backfire on them by driving up house prices – and inflation generally.

Stamp duty urgently needs reform as the burden grows, said Jonathan Stinton, head of mortgage relations at Coventry Building Society.

A shrinking number of buyers avoid altogether, as only 25.5 percent of purchases fall below £250,000 threshold. Ten years ago, 62.5 per cent escaped.

The average stamp duty bill has jumped from £6,065 to £9,038 over the decade, adding almost £3,000 to the cost of buying.

Even one in five first-time buyers get stung, Stinton said. “The surcharge is scaring away buy-to-let investors, shrinking the supply of rental properties and driving up rents.”

He added: “Reform would oil the wheels of the market and make it easier for people to move up and down the ladder throughout their lifetime.”

Hannah said stamp duty is adding to the affordability crisis, hammering transactions and threatening house prices.

Stamp duty bands need an overhaul as they have never been index-linked to house price inflation. “This would stimulate activity at the lower end of the market and improve first-time buyer affordability calculations.”

Hannah added: ”Scrapping the three percent second-home surcharge would encourage buy-to-let landlords to expand their portfolios and provide renters with a greater choice.”

Stamp duty is a brutal tax imposed on homeowners for mo good reason except to raise cash for the Treasury. It gums up the housing market and takes the steam out of the economy.

As with so many taxes, it hits more of us every year, due to fiscal drag. Hunt needs to do more than raise the threshold by £50,000. He should sharpen his axe and get Britain moving again.


Please enter your comment!
Please enter your name here