Monday, May 27, 2013

More special pleading

Stamp duty 'traps families on rung of housing ladder’

Middle-class families are being trapped on the housing ladder because the rate of stamp duty has been “ramped up” by successive governments, according to the Homeowners Alliance [should that not be renamed 'Mortgaged up to the eyeballs Alliance?]

Posted by stuartking @ 11:02 PM (2244 views)
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12 thoughts on “More special pleading

  • Thecountofnowhere says:

    And there was me thinking it was the insane prices and not the insane taxation policy.

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  • Increased airport taxes trap people within the UK. Duty on petrol traps people within their own homes.

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  • mark wadsworth says:

    Boo hoo.

    Of course SDLT is an awful tax, although vaguely land related it’s more or less the opposite of LVT.

    But they say that average SDLT paid per home is something like £5,000. It probably is, but so what? At least that’s just a one off (and comes off the price of the house anyway).

    What about the £20,000 per year, year in year out, which the average household pays in income tax, VAT, NIC and so on? Is that not a hundred times as bad? And of course for first time buyers there are privately collected taxes on top of that – all the mortgage repayments that relate to the land element of the purchase price, so that’s another £10,000 in tax right there.

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  • “But they say that average SDLT paid per home is something like £5,000. It probably is, but so what? At least that’s just a one off (and comes off the price of the house anyway). ”

    The obscene amount of money I had to pay HMRC in stamp duty was not taken off the price of the house I purchased. It just adds insult to the injury of stratospheric house prices and I think it would be better if it was paid by the seller insted of the buyer.

    Also, other tax thresholds have increased in line with inflation but not this stealth tax.

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  • mark wadsworth says:

    Phils: “I think it would be better if it was paid by the seller insted of the buyer”

    It is borne by the seller, that’s basic economics.

    The tax comes off the price paid for the house, end of discussion. It does not make any difference what the legal position is, it is the economics (relative elasticity of supply and demand) which dictate who actually bears the tax. We all know perfectly well that during the “stamp duty holiday” for FTBs, prices just went up by one per cent, and when the holiday ended, they went down by one per cent again.

    Consider – the government decides to crank up Employer’s NIC from 13.8% to 33.8%. Do you think that all employers would merrily pay this (thus pushing themselves into huge losses every year), or would they knock wages down by a fifth?

    The latter of course – this particular tax is borne by employees.

    Consider – the government whacks up tobacco duty from £4 per packet to £5, the price of fags just goes up by £1 (ignoring smuggling).

    The smoker pays the tax.

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  • @ phils

    As mw says.

    Another way of looking at it (which presupposes a motivated seller in a normal functioning market with sensible dynamics):

    You have a budget of 150k to buy a house.

    You find a house that you want to buy at an asking price of £150k (which you deem good value), but you have to factor in £1.5k for stamp duty (leaving other costs aside for now) and so offer £148,500. The seller accepts. You still pay £150k

    You would have given him 150 for it, but he gets 148.5. So the seller bears the tax.

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  • Stamp duty is yet another reason to not live in London or the south east. If you live in London, your wages are higher but you’ll be in the higher income tax bracket; you’ll pay a lot more stamp duty; and you’ll have to pay more for lots of little things such as eating out or going to the cinema. No wonder Brits are abandoning the place.

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  • I agree with the theory, but surely the practice is different.

    For example, a house is for sale for £270k. You offer £250k, which is rejected and are forced to pay £255k for it. The house has actually cost you £10k more that you wanted to pay and the additional cost, including the extra £5k stamp duty has all been borne by the buyer. The seller is not interested in the fact that you have to pay treble the stamp duty because the £250k threshold had been breached.

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  • @ phils

    The only person ‘forcing’ you to buy it, at a premium to the price that you’re prepared/want (or even able) to pay, is yourself. That’s more a matter of personal self discipline, than securing a roof over your head.

    The principle still remains, though.

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  • mark wadsworth says:

    Phils, it is not a question of “theory” it is a question of observing the real world and then recognising a pattern and seeing if it repeats.

    And it simply does.

    When they exempted FTB’s from SDLT, prices went up slightly, when it was reintroduced, prices went down slightly. When they had SDLT exempt areas under New Labour, then commercial property prices just went up accordingly.

    You can read up on this in any basic economic text book, they all explain it slightly differently but it always comes back to the same thing. Any tax on a transaction (or a flow of wealth) is ultimately paid by whichever factor is less price elastic, supply or demand.

    If you don’t believe me then Google it or check up elsewhere, read what proper great economists of yore say etc.

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  • Sorry about the long delay in replying.

    @10&11

    OK, the seller pays the SDLT.
    The bottom line is that this unfair tax is paid to the government by the people involved in the buying/selling transaction. This makes housing more expensive, which surely goes against the basic principle of this website, which is cheaper housing.

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