Stamp duty – should it be scrapped or not?

The question of whether Stamp Duty Land Tax (SDLT) should be scrapped or not is a topic that regularly crops up during times of financial hardship.

In order to assess whether the tax should be kept as is, removed entirely, or amended to some degree, one must first identify the alternatives.

Stamp duty – what are the alternatives?

Will Rice (pictured), chief executive and founder at Gen H, said stamp duty should be scrapped and replaced by a wealth tax.

“It is the principal structural ill in the housing market and a perverse and inequitable tax that subsidises the old and capital-rich at the expense of the young and capital-poor,” Rice said.

He added that it taxes people climbing the property ladder and leaves people in their ‘forever homes’, those with the most housing wealth, untouched. As such, Rice said the tax disincentivises moving home, and so impairs market liquidity.

Perversely, Rice said, the only thing more damaging than stamp duty was the stamp duty holiday introduced by the government in 2020, as this pushed house prices ever higher. Abolishing stamp duty altogether, or limiting its application to high-value properties, Rice said, would be a great first step towards fixing housing in the UK.

“However, it must be accompanied by a fully funded plan that shifts the tax burden from income to capital; from the less well off to the wealthy; and from the young and striving to the beneficiaries of the great carry trade of the past 40 years,” he said.

Scott Taylor-Barr, financial adviser at Barnsdale Financial Management, believes that a rethink of the current property taxation system could be useful.

“There have been many alternatives suggested over the years, and the one that seems to make the most sense is a tax that is levied on the seller rather than the buyer,” he said.

Taylor-Barr said this would be akin to Capital Gains Tax, and added that it would be a tax on the increase in value the property owner has enjoyed over the years - the more your home has increased in value the more tax you pay when you sell it.

“No system is ever going to be perfect, but it is more a case of choosing the least imperfect option,” he added.

Stamp duty – why removal would be unwise

Stephen Perkins, managing director at Yellow Brick Mortgages, said stamp duty provides large amounts of revenue into the treasury, so its removal at a time when the government purse is under such strain would be unwise.

However, Perkins believes that the existing system needs in-depth reform.

“I think all first-time buyers should be exempt irrelevant of their property’s purchase price, and the thresholds should be raised so more people pay less stamp duty, but the 3% surcharge for additional properties and the high percentages for those buying expensive homes remain,” he said.

Perkins added that he is not averse to some reform suggestions, such as the tax being paid for by the seller of a property rather than the buyer.

“Certainly, a stamp-duty holiday or easement could inspire the current housing market,” Perkins said.

Russell Maggs, mortgage and protection adviser at Maggs Financial Services, said the topic of stamp duty always arises as we get ready for another financial statement or budget from the government

However, Maggs questioned whether stamp duty is something that really needs changing.

“First-time buyers that need the help at the lower end of the market do not have to pay it, and for everyone else, it is numbers on a spreadsheet and money that comes out of the equity in the current property,” he said.

Maggs said the industry could have a big debate about whether stamp duty is still appropriate, but he believes there are much bigger issues politically that should be prioritised.

“Is affordable housing really affordable? Are we building enough homes? Is the profit housebuilders make fair? To name just a few,” he added.

Do you believe stamp duty should be scrapped or left as is? Let us know in the comment section below.