Finance News

Chancellor Urged to Scrap Stamp Duty in this Month’s Budget

Rose - November 7, 2017
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The Chancellor, Philip Hammond, has been urged to scrap Stamp Duty in this month’s Autumn Budget on Wednesday 22nd November 2017.

 

The Adam Smith Institute says that axing Stamp Duty would help to solve the housing crisis and deliver a £10 billion boost to the economy.

 

The think tank believes that the tax is putting people off moving to new jobs and keeping households living in homes that are too large for their needs.

 

It says that Stamp Duty does so much damage that it is “almost as bad as setting fire to the money instead of raising it in tax”. Instead, the institute suggests raising Council Tax on the most expensive properties.

 

The institute’s Sam Bowman says: “Stamp Duty is the worst tax we’ve got. It is gumming up the housing market and keeping people trapped in the jobs that aren’t best for them.

 

“Scrapping it should be a no-brainer.”

 

Last year, Stamp Duty raised a record £11.7 billion for the Treasury – up from £10.7 billion in the previous year.

 

Steven Cameron, the Pensions Director at Aegon, looks at the generational impact of the controversial tax: “Hailed as the country’s most damaging tax by the Adam Smith Institute and swelling the Government’s coffers by as much as £12 billion last year, the property tax, Stamp Duty, has been in the spotlight this week.

 

“Seen as the root cause of our clogged up housing market, controversy is raging with what to do to make the system fairer. We’re very familiar with the situation first time buyers find themselves in, struggling to get on the property ladder, but we also need to reflect on Stamp Duty costs as a deterrent to downsizing. At the heart of the issue is older people in family homes, too large for their needs, discouraged from downsizing because of Stamp Duty, which is, in turn, preventing growing families from moving up the ladder.”

 

He continues: “But the impact goes beyond just the housing market, affecting those approaching and in retirement as well. It’s also a matter of fairness across the generations – a consideration that the Government has stated will shape future policies – and an issue that receives endorsement from the financial adviser community.

 

“The removal of Stamp Duty would help to encourage pensioners to downsize, freeing up family homes. For those pensioners who are property rich but cash poor, this would also offer a new means of funding their retirement. This could become increasingly important, as future generations of retirees will no longer benefit from the generous defined benefit pensions of today’s retirees.”

 

Cameron concludes: “For most people, whether in the younger or older generations, their two greatest financial commitments are their house and their pension. The Government needs to make sure its policies in these areas complement one another.”

 

Separately, an accountancy firm is calling for the Chancellor to make it more attractive for landlords to sell up if they want to.

 

Bishop Fleming’s Head of Tax, Andrew Browne, says that the Government is taxing landlords out of the rental market, through a reduction in mortgage interest tax relief, the 3% Stamp Duty surcharge and the withdrawal of the Wear and Tear Allowance. Landlords have also recently been subject to more stringent mortgage lending criteria.

 

Browne explains his concerns: “These recent changes are designed to hit private landlords, but what the Government has not done is to make it easier for those landlords to downsize their portfolios, or leave the sector completely, without incurring massive tax penalties. It has been all stick and no carrot from the Chancellor.

 

“Landlords face a Capital Gains Tax bill of up to 28% on any gains they make on the selling of properties, without any relief for the time a property has been held, or for inflation.”

 

He continues: “In the past, any gains would have been tapered depending on the length of ownership, and any increase in value purely through inflation would have been removed with an indexation allowance. Both these reliefs have been removed by successive governments, though indexation relief continues to be available to companies.

 

“The removal of taper and indexation reliefs has created a punitive retrospective tax on private landlords, who may have bought their properties many decades ago. Inflationary pressures are outside the control of landlords, so it is unfair that they should not get some measure of relief from gains that have arisen simply through inflation.”

 

What are you hoping to hear from the Chancellor in the Autumn Budget statement?