Rishi Sunak is facing calls to scrap stamp duty completely rather than extend the current holiday in his budget next month.
While recent weeks have seen appeals from many in the property industry for the government to extend the existing stamp-duty giveaway, momentum is also growing among some politicians and campaigners for a more radical and “fairer” approach to property taxes.
A petition organised by the Fairer Share campaign that calls on the government to scrap stamp duty, council tax and the “bedroom tax” and replace them with a flat-rate payment based on the current value of a property, had as of Friday been signed by more than 105,000 people.
Those supporting Fairer Share include the campaign group Generation Rent, which represents private renters, including many hoping to buy a property at some point.
“While the stamp duty holiday has made it easier to buy and sell homes, it has driven up house prices making winners of home-owners at the expense of renters,” said Dan Wilson Craw, deputy director of Generation Rent. “This should make the government think harder about a fairer way of taxing property. Stamp duty should be rolled into council tax, to make an annual payment that is proportionate to the value of what people own. That would mean removing a major barrier to people moving home, while making sure wealthy property owners pay a fair share.”
Meanwhile, in a new policy paper published just days ago, a former economic adviser to Boris Johnson argued that stamp duty on housing transactions “is a bad tax” and should be abolished.
The £3.8bn stamp-duty holiday announced by the chancellor last July has been credited with fuelling a mini-boom in the property market and, certainly until very recently, pushing up prices, delighting many homeowners but leaving those trying to buy their first home with an even higher mountain to climb. Buyers of homes up to a value of £500,000 in England and Northern Ireland pay no stamp duty, with a reduced rate for homes above that but the holiday ends on 31 March.
In response to another petition, this one calling for the duty holiday to be extended for an additional six months, the government said in December that it had no plans to extend this “temporary relief”. However, there have been claims that tens of thousands of agreed property sales are stuck in a “processing logjam” caused by the pandemic and could entail a tax bill of up to £15,000 each for buyers if they don’t complete before the deadline.
For would-be first-time buyers, rising property prices means they have to save up for even longer to put down a deposit. Research by the Halifax bank last month said the average amount put down by a UK first-time buyer in 2020 was £57,000, compared to £46,000 the year before – though the 2020 figure for London was £130,000.
To alleviate some of these issues, Fairer Share – which describes itself as a business with social objectives whose work has been funded by the charity the Woodhaven Trust – is proposing a new “proportional property tax” that would paid only by owners, not tenants.
It would be charged annually at 0.48% of a property’s value – so the owners of a £200,000 home would pay £960 each year. This figure was chosen as it would raise the same amount in revenue as the current system of taxes, but would represent a tax cut for around 18 million households, said the group. Under its proposals, second and foreign homes would pay a higher 0.96% rate, and in addition, stamp duty would remain in place for buyers of these properties.
In his new paper written for the centre-right thinktank Policy Exchange, the economist Gerard Lyons – who was chief economic adviser to Boris Johnson during his second term as mayor of London – said temporary freezes in stamp duty were not a solution as they triggered a spurt in demand as people tried to buy before the tax was raised again, pushing prices higher, out of the reach of many first-time buyers.
“Ideally stamp duty should be abolished, but as a first step it should [be] cut to zero permanently on lower-valued properties and reduced on higher-valued properties,” he said.
The government has said that stamp duty is an important source of revenue and that its help-to-buy equity loan scheme that launched in December and will run until 2023 is limited to first-time buyers, letting them borrow up to 20% of a new-build property’s value, or 40% in London