Stamp duty: The truth


Following recent revelations that some MPs have been claiming stamp duty on second homes as parliamentary expenses – notably Theresa Villiers (£10,350) and Kevin Brennan (£10,200) – and bearing in mind that when Labour sold their Westminster HQ back in 2006 they avoided a £210,000 stamp duty bill, it is perhaps time to concede that the politicians haven’t got it all wrong: perhaps this is a tax we shouldn’t be paying.

Whilst avoiding this tax would appear to have been standard practice in Westminster, in the rest of the country revenue raised by stamp duty on residential property had increased markedly under Labour, soaring nearly eight-fold from £830 million in 1997/98 to £6.5 billion in 2006/07. This has been partly due to a move away from a single rate to a tiered system and partly due to an increase in house prices. Put into perspective, the Stamp duty land tax (SDLT) is currently increasing at five times the rate of UK salaries. Annual gross income in the UK rose by 54.3% between 1997 and 2007, whilst the stamp duty bill on the average UK property rose by 289.2% in the same period.

Raising the thresholds in line with house prices would be a good start as would a tiered rate system where consumers are only taxed on the proportion of their property value that exceeds the stamp duty threshold rather than the current system which levies a higher rate on the entire value of a property when a band is crossed; this places distorting pressure on prices in order to remain with a particular stamp duty band. It also induces people to sell their house at a particular price within a lower band on the condition that the purchaser buys the contents of the house at a fixed price and other such unusual behaviour.

As the average UK house price have increased, more and more people are drawn into a system that taxes a necessity as a luxury.