Lender calls for Stamp Duty to be reformed into a seller’s tax

| Marc Shoffman

Yorkshire Building Society has reiterated its calls to make Stamp Duty a seller’s tax ahead of the Budget next week.

The lender made a similar call last year, to no avail – while separate research has shown a rise in Stamp Duty receipts for the Treasury over the last year.

Andrew McPhillips, chief economist at Yorkshire Building Society, said that based on Council of Mortgage Lenders (CML) data, the proportion of first-time buyers able to find a home under the Stamp Duty threshold has almost halved in just a decade, as FTBs increasingly struggle to find properties under the £125,000 threshold.

According to the figures, 47% of FTB transactions were under the threshold in 2006, and that number fell to 26% in 2016.

He claims this data, and stagnant wages, shows that FTBs are struggling to get on the property ladder due to Stamp Duty and that making it a seller’s tax would help newcomers to the housing market.

McPhillips said: “In its present form, Stamp Duty does not suit today’s housing market – it pushes up costs for those looking to buy, exacerbating affordability issues in a market where prices have vastly outpaced wage growth.

“Levying the charge against sellers rather than buyers will help to reduce costs for first-time buyers, helping more people to get on the property ladder.

“It would also help those moving up the property ladder, enabling them to move to a more suitable property and potentially freeing up smaller homes for first-time buyers to purchase.

“Although this would help to alleviate some of the effects of the housing crisis, it does not address the root cause which is the lack of supply. The government should implement the proposals in their recent White Paper and go further to boost housebuilding so that there are enough properties available for people to buy.”

However, the Yorkshire Building Society research doesn’t seem to delve further into the CML data, which actually shows that while overall numbers may be down, the percentage of FTB loans in the higher thresholds has actually increased.

The percentage of FTB purchases in the £175,000 to £250,000 bracket has increased from 18% to 23% between 2006 and 2016 while 23% of home loans to the same group were in the £250,000 to £500,000 bracket, up from 6% a year ago.

Just 4% of loans to FTBs were above £500,000 in 2016, but that is still up from 1% in 2006, the CML figures show in the table below.

under under £125K- £125K- £175K- £175K- £250- £250- over over Total
£125K £125K £175K £175K £250K £250K £500K £500K £500K £500K
number % of number % of number % of number % of number % of number
Q4 of loans loans of loans loans of loans loans of loans loans of loans loans of loans
Annual
2006 188,800 47 112,200 28 72,900 18 24,600 6 2,700 1 403,000
2007 143,800 40 104,400 29 78,300 22 30,000 8 3,000 1 360,000
2008 76,600 40 56,400 29 41,900 22 15,800 8 1,500 1 192,100
2009 79,100 40 64,800 33 36,000 18 14,100 7 1,800 1 196,800
2010 78,500 39 54,100 27 43,700 22 19,100 10 2,900 1 198,900
2011 75,900 39 54,300 28 41,900 22 18,200 9 3,200 2 192,700
2012 83,800 39 58,800 27 48,300 22 23,100 11 3,800 2 217,600
2013 96,800 36 70,100 26 62,800 23 34,300 13 5,400 2 269,400
2014 99,600 32 79,500 26 74,400 24 47,500 15 7,300 2 309,200
2015 89,000 28 80,500 26 71,700 23 62,000 20 9,000 3 312,900
2016 88,300 26 83,600 25 77,000 23 76,500 23 12,100 4 338,600

Source: CML

But separate research from accountants Blick Rothenberg show just how valuable Stamp Duty receipts are to the Treasury, making it seemingly unlikely that Chancellor Philip Hammond will make any changes.

Other publications have, however, rumoured that Stamp Duty rules could be reversed due to a slowdown in higher end property transactions.

But Paul Haywood-Schiefer, assistant manager at Blick Rothenberg, said Stamp Duty receipts increased by 11.65% during 2016, mainly boosted by the 3% surcharge on second or additional properties.

He said this helped the Government to a 5.7% increase in total receipts from income, business and land taxes, giving it a record £9.4bn surplus.

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3 Comments

  1. Will
    March 3, 2017 at 08:46

    Another so called expert no doubt.  Change to tax to a sellers tax and you will reduce the supply of property coming to the market. It is the gross interference with the property market that distorts it.  Why not just abolish it on all property below £1,000,000.

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  2. stephen8114
    March 3, 2017 at 10:34

    This may prove to be a good move! Removing the burden of stamp duty from buyers would surely increase affordability. While sellers are likely to pass this tax back to the buyer via an increased sale price, it becomes far easier to absorb via lending, the lenders benefit from a few % higher loans (surely not lost on them) and the seller is not burdened with the separate tax on their related purchase.

    The current stamp duty regime is stifling the market, putting to heavy a burden on buyers and their ability to buy in higher value areas, while no tax will be viewed positively, this suggestion at least tries to remove the current road block experienced by most, eager to get on, or move up the ladder.

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  3. LordElpus56
    March 3, 2017 at 10:52

    Surely an easy way to ensure the treasury gets its bit without stifling the market is to simply charge 0.5% to the buyer and 0.5% to the seller.

    That way, everyone pays their bit, and it’s not an eye watering amount that kills off any chance of people wanting to better themselves.

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