The Telegraph says that the number of people paying stamp duty on houses worth over £250,000 has risen from 5 per cent to 26 per cent over the past decade. As all of us have seen, the rapidly booming housing market that characterised the last decade has pushed a staggering 4.25 million houses into the bottom bracket of stamp duty, a 385% increase.
In addition to this, the average stamp duty bill has risen by from £838 to £1,793. Now they want to impose a new bracket of 5% on homes over £1 million. This is going to drive away those who are wishing to place their capital in the UK and reduce investment in the longer term. The report suggested that "these findings will underline calls for a root and branch reform of the controversial tax, replacing the slab system with a much fairer tiered model."
Obviously the easiest solution would be to increase the thresholds in line with rises in house prices. However would any government change the brackets? Seeing house prices rise by 140%, the devious mandarins of Whitehall may see an opportunity. The market is doing their work for them; increasing the tax revenues automatically without discretional and dictatorial policy from the corridors of power.
The best way of dealing with this problem is by eliminating the problem altogether – abolishing the tax altogether. Stamp duty would be back in the buyer’s pocket, available to save or spend in the private sector. It could be spent on a new sofa, TV or even on a night out celebrating the purchase of a new home – whatever they choose, it’s a more efficient use than if the government spends it.
In a stagnant property market, abolishing the tax across the board would lead to an incentive for people to buy now rather than waiting. That £1793 is better off in the hands of individuals to spend in the wider economy – not spendthrift government officials.