The Stamp Duty holiday introduced in July 2020 as an attempt to avoid a pandemic-triggered property market crash was wildly successful in terms of keeping the market moving. The extension of the holiday to the end of June 2021, which should allow almost all of the 100,000 or so buyers who were at risk of missing the original deadline to complete in time, has also been well received.
With all this enthusiasm for Stamp Duty relief flooding the market, we thought it was worth looking at the longer-term implications of the tax and questioning what might happen if it were to be scrapped altogether.
Matt Harper-Penman, Group Director at Fabrik Property Group, shares his thoughts:
Is the current system of Stamp Duty a fair one?
“Taxes and levies in all industries work against the principles of a free market – a free market meaning that someone pays what they think something is worth, while the seller sells for what they think it’s worth. It’s a fair deal for both sides.
“For our economy to prosper as much as it could, we need to encourage a free market as much as possible. Stamp Duty Land Tax is a way of manipulating the market, in favour of how the tax law has been written.
“London is the clear example of this. Property prices in the millions mean that buyers must pay eye-watering levels of Stamp Duty. Those buying a home costing between £925,000 and £1.5 million will incur a rate of 10%, while those buying properties worth over £1.5 million will have to pay 12%. When you add in the additional 3% that investors and second home buyers have to pay, those rates jump to 13% and 15% respectively.
“That’s a ridiculously high rate of tax. It’s so high that it actively discourages people from buying the homes they would otherwise purchase. Punishing people financially for being willing to enter into larger property transactions isn’t a fair approach. It detracts from the entire free market concept.”
Is scrapping Stamp Duty the answer?
“No, I don’t think that scrapping Stamp Duty entirely is the right approach. We need taxes in place in order that the government can invest in essential resources – schools, the NHS, transport and infrastructure projects and a whole host of other services.
“However, that’s not to say that we can’t refine the current system. It doesn’t make sense to discourage the wealthiest members of society from living in the UK by hitting them with punitive property taxes like this. When you compare the taxation rates in the UK with locations such as Dubai, for example, it feels increasingly hard to justify why wealthy families and investors should remain here.
“Clearly, this isn’t a great situation for our country. We want to bring revenue into the country and retain it, not push those with wealth away. So, no, I don’t believe it would be a good idea to get rid of Stamp Duty entirely. However, I do believe the system needs a radical rethink in order to remove the current lack of fairness.”