Stamp duty is Britain’s most horrible tax. We should forget cutting it and abolish it altogether, says Money Week's Merryn Somerset Webb.
Stamp duty cuts may raise prices – but interest rates will offset that. Most prime ministers would look at the most recent stamp-duty receipts and be pretty pleased. In the first eight months of the year, £10.6bn was collected. In August alone,
receipts hit £1.6bn, the second-largest amount on record (after £1.7bn in December 2021).
Not to be sniffed at. Unless you are Liz Truss, who has a plan for this golden goose. It is (as far as we know) to slash or kill it.
This is fabulous news. Long-term readers will know that we consider stamp duty to be the worst tax in Britain (and given the choices available to us here that is saying something). It makes it hard for buyers to save up deposits – they have to come up with the cash for stamp duty, too. It makes it harder for people to move (as stamp duty has risen so we have stopped moving so often).
This gums up both the labour and the housing market. Stamp duty is effectively a wealth tax – and a particularly distorting one at that. It should be abolished in its entirety (or at the very least shifted so that the seller – the one who has the cash to hand – pays it).
Don’t expect house prices to rise
Fans of stamp duty will say that abolishing it will cause a new nightmare: another round of house price inflation.
There is some evidence that rising transactions lead to more house building in the longer run (and that cuts in stamp duty lead to rising transactions) but for now the supply of houses for sale (around 36 properties per agent) is knocking around long-term lows. If that doesn’t shift, and cutting stamp duty leads to a rise in demand, the price of every house for sale should rise in line with the scale of the cut – or perhaps by more.
Source: moneyweek.com