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Stamp Duty – Should Sellers Pay?
The Seller Should Pay
Stamp duty on homes sold for owner occupation should be paid by the house seller not the buyer according to a suggestion from the Yorkshire Building Society.
Benefits to First Time Buyers
Such a change would give a boost to those trying to get onto the housing ladder because it would make first time buyers exempt from the tax burden saving an average of £13,171 in London and £3,791 in the rest of England.
Around 76% of first time buyers, a total of 225,200, paid stamp duty in the 12 months between June 2015 and June 2016 according to the Council of Mortgage Lenders after purchasing properties above the £125,000 minimum threshold.
What the Yorkshire say
Andrew McPhillips who is chief economist at the Yorkshire Building Society said “This policy would eliminate one of the many barriers for people trying to get onto the first step of the property ladder. Theresa May said in her first few speeches as Prime Minister that the younger generation have had it harder than at any previous time to get into the housing market, so we feel that this is a timely proposal to make.”
The building society has now made a formal submission to the government asking that the Chancellor Philip Hammond make the change in his autumn statement, due on 23rd November. It would be consistent with the Government’s commitment to increasing home ownership in the UK and in line with Hammond’s own comments that housebuilding will be at the centre of the policies he will be announcing in November.
Forecast Impact of the Change
The Yorkshire Building Society forecast that if the change were to be implemented it would increase the number of transactions by 16,000 in the first twelve months, including 6,000 more houses being bought by first timers. This is based on the expectation of a 2% increase in the number of transactions, similar to the effect of the stamp duty holiday when it was briefly applied in 2009. That holiday was introduced as a reaction to the slump in sales in the aftermath of the 2008 financial crisis.
Benefits for Other Buyers
In addition to benefitting first time buyers Mr McPhillips also claimed that such a change would also benefit other buyers moving into larger homes. “If you are moving up the ladder in terms of value you will be paying the stamp duty on the property you sell, which being cheaper, will attract a lower stamp duty charge than the property you are moving into.”
However the Yorkshire acknowledge that such a change in stamp duty would be a negative for older generations who may be trying to downsize.
Make New Build Homes Exempt
The Society also recommends that all new-build homes should be exempt from stamp duty entirely, as house builders would otherwise put up their prices to factor in the cost of paying the tax, and estimate that this would cost the Government between £750 and £800 million per annum.
The total amount of tax collected via Stamp Duty equalled approximately £7.8 billion in the year to June 2016 but Mr McPhillips suggests that the government would benefit from the change thanks to the resulting increase in the number of transactions – a 2% increase would generate an additional £156 million.
Whilst acknowledging that sellers may try to increase their asking price to take account of having to pay the stamp duty Mr McPhillips added “there is no real incentive for people to do so as yes you are having to pay the stamp duty on the property you are selling, but it is less than the one you are buying so in a net change you are better off”.
Mr McPhillips did not comment on the possibility of a falling market which would conceivably leave sellers worse off when compared to the current status quo.
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