Is it time to scrap stamp duty?

Some brokers believe the tax should be placed on sellers

Is it time to scrap stamp duty?

Stamp Duty Land Tax (SDLT) is a tax charged when you purchase a property in the UK. However, the introduction of a stamp duty holiday, alterations to the tax, or its removal altogether, have long been debated by those working in the mortgage industry.

In this article, Mortgage Introducer lists the views of a host of mortgage professionals on what should happen with the taxation next.

Amending stamp duty

Scott Taylor-Barr, financial adviser at Barnsdale Financial Management, said stamp duty holidays have, in the past, driven up transaction volumes to near unsustainable levels and done little to help people on to the property ladder, as they generally drive-up house prices.

As such, Taylor-Barr said that there are far better ways to help the market if the government really feels it needs support.

“On the whole, stamp duty is an outdated and ineffective tax; it would be far fairer to have a tax that is imposed on the sale of the property,” he said.

Taylor-Barr believes the alternate tax could be based on the growth the property owner has benefited from, similar to Capital Gains Tax - therefore moving the tax burden to the person who has likely seen the most benefit of rising property prices.

Graham Cox, founder at Self Employed Mortgage Hub, agreed with Taylor-Barr that another stamp duty holiday would not benefit the market.

“All the last one did was increase property prices even higher - a new holiday risks reversing the recent house price falls and pushing values up again; with mortgage rates for many still around 6%, that would be a disaster,” he said.

Cox added that there needs to be a shift away from the notion that house price increases are good and declines are bad.

Simialry to Taylor-Barr, Cox believes amending the tax so it is placed as the sellers’ responsibility rather than the buyers’ would benefit the market most.

“If the vendor had to pay stamp duty instead of the buyer, that could help stop the rampant house price inflation we have seen over the past two decades, and would stop people seeing their home as a speculative investment,” he said.

No stamp duty holidays

Stephen Perkins, managing director at Yellow Brick Mortgages, said given the government ‘often reports there is no money to properly fund anything’, he believes it is nonsensical to look to remove stamp duty or have a holiday from it.

The resulting implications, Perkins said, would only temporarily inflate house prices, which need downward adjustment to be more affordable.

“That said, some targeted tweaks such as reduced stamp duty for people downsizing and having first-time buyers exempt at any purchase price would be worth consideration,” he added.

Rohit Kohli (pictured), operations director at The Mortgage Stop, believes we cannot do away with stamp duty altogether. The country has become reliant on the income it brings, he suggested, but there are ways to improve how it works.

“For example, you could be allowed to choose to pay stamp duty over the life of the mortgage rather than as a lump sum, and repay any balance outstanding when you sell if it has not all been paid,” he said. To incentivise the government to consider this as an option, Kohli said that interest could be applied if people choose this option.

Finally, Kirsty Wells, director at Blueprint Mortgages & Protection, believes another stamp duty holiday would make little difference in the property market currently.

Most people, Wells said, are worrying over their property dropping in value and mortgage interest rates increasing.

“I have not had any conversations with potential clients in the last six months that are weighing up if they should buy or sell and stamp duty is holding them back,” she said.

Instead, Wells said it is the current uncertainty in the UK economy and cost-of-living crisis that are weighing on peopleat present.

What changes would you like to see made to stamp duty? Let us know in the comment section below.