In a world of static or falling prices the current slab system presents a major barrier to purchasing property, RICS believes. With housing transactions down 40% in one year, there are significant knock-on impacts to house building and the wider economy. RICS believes that Stamp Duty should be reformed to lower the tax hurdle for first time buyers and those moving home. A two tier marginal system could significantly help increase transactions and help Government to fulfil its objectives for the housing market.
RICS proposes that no homebuyer should pay Stamp Duty on the first £150k of their new home. The additional value between £150k and £250k should attract a marginal rate of 2.5%. The value over £250k should be taxed at 5%.
These proposals would cut Stamp Duty significantly for all those purchasing homes under £1million - 99% of homebuyers. RICS predicts this would cost Government a maximum of 24% of its SDLT revenue in 2008/9.
The thresholds for Stamp Duty rates should then be annually indexed, reflecting house price growth and inflation.
Government should also consider offsetting SDLT for first time buyers and senior home owners who wish to downsize.
RICS believes that these changes would see a significant increase in the number of transactions. In turn, through additional Stamp Duty payments, this would reduce the revenue cost to Government of reform.
