Partner Article

Stamp duty survey – will sellers have to pay?

We’ve heard a lot about property taxes recently. For example:

1. They’re relatively easy to collect (it’s rather difficult to hide property!) and could even be extended to tax non-residents on their disposals of second homes and investment properties in the UK. That would end a long-standing tax break where the UK is almost unique.

2. Property taxes already impose a huge burden on the economy and should be cut back to boost growth.

3. The whole structure of UK property taxes should be radically overhauled to encourage development, boost home ownership and stimulate growth.

One suggestion is that if stamp duty land tax (SDLT) was paid by the seller and not the buyer, then it could help thousands of people get on to the housing ladder by placing the burden of tax on those that are benefiting the most from the rise in property values.

We conducted a survey earlier this week asking whether people thought it made more sense for people to pay SDLT when they came to sell their homes. Out of the 97 responses, a surprising 64% of people said they thought it was a good idea.

So what would the effect be if SDLT was paid by people selling their homes?

• Well the general consensus is that it would be good news for first-time buyers – or would it? Sellers would most likely add the cost of the SDLT to the asking price of the house they’re selling, and so prices would generally inflate across the market to reflect this. Of course this would make it harder for people struggling to get into on to the housing market for the first time.
• People might be less likely to use property as an investment opportunity knowing that their profit margin would be less when they come to sell, and SDLT might be seen as a ‘tax’ on buy-to-let landlords.
• Buyers would be put off purchasing properties that needed improvement or renovation, knowing that a significant proportion of the profit they make will be handed back to HMRC when they sell.
• On a brighter note, sellers might be more likely to keep their properties under the SDLT ‘threshold’ – for instance, keeping it under £250,000 could mean the difference between paying 1% SDLT and 3%.

Of course, if SDLT was changed in this way, there would have to be complicated rules to make sure that people who own property on which they have already paid stamp duty (on acquisition) don’t have to pay it again when they sell it. The devil, as people are fond of remarking, is in the detail…

This was posted in Bdaily's Members' News section by George Bull .