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dryrot

The "reduce/abolish" Stamp Duty Thread

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Hi

seen more and more "reduce the burden of stamp duty" articles on the MSM. e.g.

http://www.express.co.uk/news/property/471543/TaxPayers-Allance-call-to-cut-stamp-duty-tax-as-moving-costs-soar

http://www.dailymail.co.uk/news/article-2607465/Stamp-duty-warping-housing-market-As-number-homes-sale-plummets-experts-attack-vindictive-tax.html

http://www.thetimes.co.uk/tto/opinion/columnists/article4069188.ece

etc. etc. I could agree with tapering the increase (such that you only pay 3% say, on the amount between 250k and 500k rather than on the whole £500k. But the whining from those who usually rejoice about HPI when they have to pay even a minimal tax on it... :(

We'll see a lot more of the above articles.But perhaps they are running out of options - short of jailing anyone who has not taken out a mortgage by age 30, not sure how else they can prop up the property market?

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Stamp duty is a barrier to mobility and restricts supply.

To upgrade from a £450K home to a £550K home, costs an additional £22K in duty, so for an increase in property value of £100K, the effective rate is 22%. Little wonder people choose to extend/improve their own homes.

On a longish chain, the government makes a pile charging 1-7% on each purchase. I think that duty should only be charged on the difference between a sale price and a purchase price if at all.

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Stamp duty discourages people from moving, less transactions make a market more volatile.

So it harms all of us including those who are not rich.

Getting rid of it and having a LVT instead would be a much fairer idea.

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House prices tripled under Labour; a property costing 100k in 1997 would cost 300k in 2009, wages rose by 30%. That is the real problem not 3 or 5% stamp duty.

Stamp duty is a factor in the problem. In 2001, a property costing £240K incurred duty of £2,400 (1%), now the same property is worth £600K and incurs duty of £24,000 (4%). So a second time buyer looking at increasing the value of their house, maybe by about £100k, pays around ten times as much duty these days. So they tend to stay put.

Remove duty, increase supply and prices will fall as the market will function properly rather than be driven by scarcity.

Edited by arrgee1991

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Stamp duty discourages people from moving, less transactions make a market more volatile.

So it harms all of us including those who are not rich.

Getting rid of it and having a LVT instead would be a much fairer idea.

Agreed. Less transactions causes scarcity and inflates prices.

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Stamp duty has increased HMRC revenues, but halved the volumes of transactions. And if you think HPI is high, look at the revenue raised by stamp duty. Almost five times what it was at the end of the last century.

It is a nasty vindictive stealth tax which effectively has people paying more tax in one house purchase than they would in a year's employment. It inhibits mobility and causes scarcity. Most people just add it to the mortgage, so the effect is over the period of ownership.

http://www.hmrc.gov.uk/statistics/stamp-duty/stamp-tax-sep13.pdf

UK £millions
1992-93 280
1993-94 465
1994-95 520
1995-96 465
1996-97 675
1997-98 830
1998-99 1,065
1999-00 1,825
2000-01 2,145
2001-02 2,690
2002-03 3,525
2003-04 3,710
2004-05 4,620
2005-06 4,585
2006-07 6,375
2007-08 6,680
2008-09 2,950
2009-10 3,290
2010-11 4,040
2011-12 4,220
2012-13 4,905
Edited by arrgee1991

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Stamp duty is a barrier to mobility and restricts supply.

To upgrade from a £450K home to a £550K home, costs an additional £22K in duty, so for an increase in property value of £100K, the effective rate is 22%. Little wonder people choose to extend/improve their own homes.

On a longish chain, the government makes a pile charging 1-7% on each purchase. I think that duty should only be charged on the difference between a sale price and a purchase price if at all.

Plus the sales fees and moving costs.....3 years rent for me.

Buying is dead money.

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If the govenment really wanted to reduce HPI while still taking a slice of the pie, they could always just charge CGT or even income tax (so that the profits take into account the overall weath of the seller) on all sales - this would

help first-time-buyers who'd pay nothing, and tax the unearnt gains when trading up. If you added a sliding scale that could actually take > 50% of the profits, I would have thought that would discorage crazy asking prices...

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Stamp duty discourages those at the top of the ladder from downsizing too as a good amount of the surplus will be used up and therefore reducing the incentive to do so, further limiting supply of larger family homes

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I would rather pay 10% stamp duty for a property at a 1997 price plus inflation rather than 0% stamp duty at current prices. People can't move because the second step upgrade is too expensive and yes stamp duty has a small impact but nothing like the that from HPI. In your example the added value of the property is £360,000 and the person who bought it in 2001, if doing the same job, would never be able to afford the same property. This is the issue with HPI, stamp duty is a side show.

Stamp duty causes HPI. Remove stamp duty, increase supply and prices fall. They are connected.

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Stamp duty discourages those at the top of the ladder from downsizing too as a good amount of the surplus will be used up and therefore reducing the incentive to do so, further limiting supply of larger family homes

Agreed. Main reason for selling these days is death. Divorce used to account for a lot of sales, but nowadays the house is let rather than sold.

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So in ten years the tripling of house prices was due to stamp duty and not cheap credit. And the recent soaring HPI is due to stamp duty and not FLS and HtB.

Did I write that? I wrote "Stamp Duty causes HPI" I did not write "Stamp Duty is the sole cause of HPI" I explained exactly why as it constrains supply. Remove it, increase supply and prices will fall.

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Imagine I buy a house for, say, £275k. What's to stop me giving the seller £249k and offering them £26k for that clapped-out lawnmower in the shed?

Thus avoiding the 3% rate of stamp duty...

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Agreed. Main reason for selling these days is death. Divorce used to account for a lot of sales, but nowadays the house is let rather than sold.

You're talking complete pish, throughout the thread.

Evidence that death is main reason for sales please.

Evidence that sd causes HPI please.

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Imagine I buy a house for, say, £275k. What's to stop me giving the seller £249k and offering them £26k for that clapped-out lawnmower in the shed?

Thus avoiding the 3% rate of stamp duty...

It's illegal tax avoidance and HMRC will spot it.

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Fair enough. I'd just like to take this opportunity to point out this is an entirely hypothetical situation as I'm unlikely to be buying a house any time soon!

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It's illegal tax avoidance and HMRC will spot it.

Imagine I buy a house for, say, £275k. What's to stop me giving the seller £249k and offering them £26k for that clapped-out lawnmower in the shed?

Thus avoiding the 3% rate of stamp duty...

Peter Mandelson allegedly got away with it.

http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/2866274/Revenue-to-stamp-on-duty-loophole.html

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I simply ask what is it's purpose?

As has been pointed out, stamp duty makes it more costly to move house, lowers transactions, it's another spanner in the market.

Stamp duty was first introduced in England on 28 June 1694, during the reign of William and Mary, under "An act for granting to their Majesties several duties upon vellum, parchment and paper, for four years, towards carrying on the war against France".

Is that still going on then?
Edited by Parkwell

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You're talking complete pish, throughout the thread.

Evidence that death is main reason for sales please.

Evidence that sd causes HPI please.

Maybe, but what evidence can I provide? I can't take these things in isolation and prove them. Death (or expected death) is a big reason, if not the main one, for sales of bigger properties. Stamp duty reduces supply, so if it were removed supply would increase and it is probable prices would fall as a consequence. There are far too many variables to prove any of this in isolation.

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and totally ignored the main causes of hpi, it's as if you are a troll, unless you think stamp duty is the main cause of hpi.

This is The "reduce/abolish" Stamp Duty Thread, so that's why I am focusing on that. Stamp Duty is a cause among others like easy credit and low interest rates. How much impact it has I don't know, but if it were abolished, then supply would increase.

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Imagine I buy a house for, say, £275k. What's to stop me giving the seller £249k and offering them £26k for that clapped-out lawnmower in the shed?

Thus avoiding the 3% rate of stamp duty...

Sorry, computer's browser playing up. Can a mod delete please.

Edited by renting til I die

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Imagine I buy a house for, say, £275k. What's to stop me giving the seller £249k and offering them £26k for that clapped-out lawnmower in the shed?

Thus avoiding the 3% rate of stamp duty...

I'm guessing that this does happen in some cases, however risky it may be. In fact, I know someone at work who did this when he bought a house for £260k a few years ago. £10k in cash, the rest on the books.

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