Stamp Duty Land Tax

The current stamp duty system is inefficient, inequitable and in desperate need of reform.  The BSA recommends that the Treasury carries out a review of stamp duty.
 
A 2006 survey of building society CEOs found that reform of stamp duty would be the number one priority if they were given the chance to be Chancellor of the Exchequer for a day. In a survey undertaken by the BSA in Spring 2007, stamp duty was seen as the third highest barrier to home ownership for first time buyers.

The Government announced in the 2005 Budget that it would increase the zero-rated stamp duty threshold from £60,000 to £120,000; in 2006 it announced a further modest increase to £125,000.  Despite further significant house price inflation since then, there was no change to the threshold in the 2007 Budget. As a consequence, more and more buyers are being dragged into the stamp duty net, with 73% of all buyers and 54 % of first time buyers being forced to pay stamp duty (Source : Survey of Mortgage Lenders CLG/CML).

While any increase in the stamp duty threshold will alleviate pressure on buyers (and particularly first time buyers), BSA feels it is time for a complete overhaul of this tax. This is because not only does it prevent first time buyers getting onto the property ladder, but it also distorts the property market.

This is because the tax operates in a 'slab’ system that results in a big increase in the amount of tax that has to be paid once each threshold is exceeded. As a consequence, sellers tend to price properties that would have been just over the threshold just below the threshold, so that buyers can avoid paying the higher rate of tax. The tax rate is paid on the entire value of the sale, rather than just the amount above the treshold.  

We believe that a review should look at both how the negative impacts of stamp duty on first time buyers can be overcome, along with how the distortions that it creates in the property market can be removed.