RICS calls for stamp duty reform
The RICS believes SDLT is unfair to people on lower incomes and penalises first time buyers. It wants to see an alternative proposal published that would remove market distortions, help more first time buyers and maintain revenue neutrality for HM Treasury.
According to a RICS survey, 95 per cent of chartered surveyor estate agents believe SDLT is in urgent need of review. Their concerns centre around the ‘slab’ approach of the tax where, under the current taxation structure, homebuyers who purchase a property priced between £120,000 and £250,000 are eligible to pay one per cent of the value of that property in SDLT. Properties between £250,000 and £500,000 pay three per cent of the property value and for properties bought over £500,000 SDLT of four per cent of the property value is incurred.
RICS members agree that this has caused house price clustering, tax avoidance, impeded mobility and problems for first time buyers. The nil per cent band for this tax is £1 to £120,000 whilst the average UK house price is £185,788. Up front costs are a major issue for first time buyers, resulting in many remaining in the rental market. RICS members recently reported the biggest increase in tenant demand in nearly five years.
RICS is therefore proposing that:
– SDLT be changed to a marginal system, like income tax, where the tax take is a levy on the amount above a certain level, not the total transaction value. This would remove the distortions that the slab system produces, particularly at the major pinch points of £250,000 and £500,000.
– The bottom threshold be raised to £150,000 in order to help first-time buyers onto the housing ladder. Raising the 0 per cent level by £30,000 would remove a further 17 per cent of all transactions from SDLT, resulting in nearly 50 per cent of house purchases falling outside the tax.
– A marginal rate of 5.5 per cent be applied maintaining revenue neutrality. Under this system most people buying homes (costing less than £1m) would pay less, whilst the majority of those buying property above £1m would pay more.
RICS chief executive, Louis Armstrong, said: “Our proposed system would be fairer for the house-buying public, ensuring that those who can pay, do pay. It would create more movement in the property market, and it would be revenue- neutral, which should appeal to the Government.
“The long-term gain for people buying and selling their homes would be well worth any temporary market turbulence. Whilst there would be some who would pay more under our proposal, this is primarily as a result of the inherent flaws of the existing ‘slab’ system, that unfairly and artificially protects a particular group.
“Overall, nearly 50 per cent of house transactions would be removed from this tax, without a fall in revenue. At present the ‘slab’ approach has the potential to affect around 65 per cent of home buyers.”
Jeremy Leaf, chairman of the RICS residential faculty, said:
“It’s not just homebuyers who resent the current tax structure. Estate agents firmly believe it should be changed. The structure of stamp duty is antique and this tax needs to catch up with the property market and house prices.”