Blog

Make stamp duty work for everyone

Bob Hunt

Bob Hunt

8 October 2021
With the government taking a record-breaking £1.3bn in stamp duty in July, should the ‘holiday’ be all year round?

As we approach the end of September and the final throes of the (partial) stamp duty holiday, there is bound to be plenty of soul searching throughout the industry on what is now the best way forward.

Of course, after this part of the holiday ends, the tax will return to its pre-8 July 2020 levels. In England — for main residences, at least — it means the zero rate returns to below £125,000, the 2% rate to between that figure and £250,000, and the 5% rate to above £250,000 and up to £925,000. Those purchasing an additional property can add an extra 3% to that.

It seems rather obvious to suggest that the number of purchases will dip as a result of that return to ‘normality’, and more buyers will need to factor in much larger stamp duty costs when weighing up their purchase decisions.

In August, the Halifax deemed the average house price to be more than £261,000; Nationwide said it was lower, at around £244,000; and the Office for National Statistics put it at £266,000. You don’t need me to tell you that, on average, UK homeowners are going to be paying at least 5% stamp duty on their purchases.

Where next?

What could, or rather should, happen next? Well, first, let’s highlight how the government made £1.3bn in stamp duty land tax alone in July. There is a 14-day window in which to pay and, clearly, after the large number of June transactions, it was always going to be high.

But that figure is a record and it is based on a holiday period where purchasers paid zero stamp duty up to £500,000. Buyers of additional properties had to pay just the extra charge. But look at what it delivered for the government in terms of tax take.

Of course, there is a good argument to suggest the numbers of transactions generated by the holiday might not be sustainable if it was made permanent. But there is also a good argument to suggest this kind of stimulus would continue to fuel interest and activity, and transaction numbers would be lifted as a result.

Where might the money that would have gone on stamp duty be spent? How might the wider economy benefit? And, lest we forget, the government stamp duty take — given what house prices are doing — could also continue to run at levels that make such a decision to permanently introduce a ‘holiday’ even more attractive.

Caveat

There is, however, a caveat — one highlighted by a recent report commissioned by the Family Building Society, entitled, ‘Lessons from the Stamp Duty Holiday’. This is the ongoing impact on prices, the inflation it may be generating, and the significant issues this presents for buyers. Did the stamp duty saving merely inflate offers for properties — pricing first-time buyers (FTBs) in particular out of the market even further?

Making stamp duty zero for all FTBs regardless of the property price is one option that probably should be brought in but, even so, the assessment of what may happen to house prices is undoubtedly relevant.

However, to what extent are those rises a result of supply-side issues rather than just stamp duty holidays? Fundamentally, it is the lack of supply that drives up prices, not a tax break that is a much smaller percentage of the cost of buying a home. Certainly a permanent stamp duty holiday makes much more sense in an environment where we are hitting our housing supply targets, but that doesn’t mean it shouldn’t happen before those targets are hit.

Stamp duty is unlikely to go away. Those calling for its abolition are probably shouting into a hurricane. But there are ways to make it work for all — to incentivise the market and deliver a fair tax take for the government. The evidence of the past 14 months perhaps gives even greater momentum to a permanent holiday.
 

Reading this blog counts towards your CPD!

Click here to add this session to your Paradigm CPD log.


21 December 2023

PTs remain a big part of the marketplace


21 December 2023

Not all wine and roses but outlook is better


15 December 2023

Artificial Intelligence: A vision for the future


12 December 2023

Reflecting on 2023


11 December 2023

Mental Health Matters: Menopause


8 December 2023

Looking ahead: Reasons to be cheerful about the market in 2023


17 November 2023

Why TikTok could be a winning tactic for brokers


30 October 2023

How advisers can improve the quality metrics with insurers


27 October 2023

The Aggregator Market - Friend or Foe?


25 October 2023

Don’t let Charter support remove advice from the mortgage process


3 October 2023

How to strengthen your defences against cyber threats


29 September 2023

White Dragon Communications


8 September 2023

Advisers deserve recognition for keeping borrowers on lender books


8 September 2023

Claims history of an insurance should form core part of assessing true value of insurance and advic


23 August 2023

The good, the bad & the ugly of using Artificial Intelligence (AI)


14 August 2023

Accessibility in your marketing


14 August 2023

Choosing the right social media platform for you


7 August 2023

Staying safe online


7 August 2023

Search engine optimisation: the process of making your site better for search engines. 


4 August 2023

The blasé attitude towards sudden mortgage withdrawals is not good enough


1 August 2023

Is your content compliant?


10 July 2023

The argument for higher proc fees for better quality business is undeniable


22 June 2023

Product withdrawal timescales and how brokers can adapt


1 June 2023

We're not in mini-Budget territory yet!


24 May 2023

Skipton’s 100 per cent mortgage should be replicated, not feared


30 April 2023

Protection And Mortgage Fair Value Assessments – What Is My Actual Responsibility?


6 April 2023

Lenders will compete on mortgage rates, but don’t expect a price war


27 March 2023

Vulnerable Customers and Economic Abuse


Paradigm

THIS SITE IS FOR PROFESSIONAL INTERMEDIARY USE ONLY AND NOT FOR USE BY THE GENERAL PUBLIC.

APCC Member
Paradigm Consulting is a Member of the Association of Professional Compliance Consultants

Paradigm Consulting is a trading name of Paradigm Partners Ltd
Office address: Paradigm Partners Ltd, Paradigm House, Brooke Court, Wilmslow, Cheshire, SK9 3ND
Paradigm Partners Ltd is registered in England and Wales. No.09902499. Registered Office: As above

Paradigm Mortgage Services LLP
Office address: 1310 Solihull Parkway, Birmingham Business Park, Birmingham B37 7YB
Registered in England and Wales. Company No: OC323403. Registered Office: Paradigm House, Brooke Court, Lower Meadow Road, Wilmslow, SK9 3ND
Paradigm Mortgage Services LLP is a Limited Liability Partnership.

Paradigm Protect is a trading name of Paradigm Mortgage Services LLP
Office address: 1310 Solihull Parkway, Birmingham Business Park, Birmingham B37 7YB
Paradigm Mortgage Services LLP is registered in England and Wales. Company No: OC323403. Registered Office: Paradigm House, Brooke Court, Lower Meadow Road, Wilmslow, SK9 3ND
Paradigm Mortgage Services LLP is a Limited Liability Partnership.