Stamp duty, the stupidest and unfairest tax around

When is the Government going to do something about stamp duty? Probably not while it continues to cash in to the tune of £1bn a month on the stupidest and unfairest tax around.

It baffles me as to how in this day and age it can be considered reasonable that a tax can be applied in such a painfully dumb fashion – on a home’s entire value once it crosses a threshold and paid by the buyer.

Buy a home for £125,000 and you pay no stamp duty, but a home for £125,001 and you pay 1% on the whole cost - £1,250. And the system becomes even unfairer at the £250,000 threshold, above which you pay 3%. This means a £250,000 home has stamp duty of £2,500, but a £250,001 home has an astronomical £7,500 levied.

You can do the sums with This is Money’s stamp duty calculator.

This is in direct contrast to what is considered a ‘sensible’ system of tax – the marginal style used by income tax where people pay tax in stepped bands on their whole income.

To compound the misery it is the buyer who has to pay what is essentially a tax on the money the seller has made on their home. This tax hurts first-time buyers and young families trying to climb the property ladder the most.

Mortgage lenders and the property industry have long campaigned for this to be overhauled, but it just gets worse and the Government doesn’t seem to care.

I hope one day they see sense.

- Simon Lambert, This is Money

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Comments

[george groom]

Once again, as with inheritance tax, when introduced a seemingly reasonable tax has grown into a monster through inflation and the callous refusal of this government to adjust bands and limits in line with inflation - Gordon "The grabber" strikes again.

[Raymond Hughes]

Another unfair Tax is the one the Government uses on those of us who can not get a mortgage even though they can afford the repayments.
The Scheme to collect this tax by the back door is called Low Cost Housing.

Initially is seems likle good idea, you purchase a share in a property through a government funded housing association, they own a percentage of the property while you own the rest. Seems fair untill you try and purchase the percentage owned by the housing association.

Then you have to pay the market value at the time of purchase, so for instance in my case property bought in 1994 at a cost of £62000 of which 50% was paid for by both parties (remembering the housing association is funded by the Government) it would now cost me another £95000 to fully own the property on top of my existing mortgage.

It means along with the rent paid to the housing association of approximatley £20000 over the period, the housing Association has made a wacking £115000 profit, which (and here comes the back door tax) they say is then used to help others on the housing ladder. So in fact as well as purchasing a house I am also supplying tax for others to do the same unlike those on full mortgages who do not contibute nothing (and neither should they).

Just watch for the amount of low cost housing schemes in your area to see how much the Government likes this form of back door tax.

Then when the value of my property reaches a certain figure the Government takes another percentage in inhertance Tax.
Winning all round at the exspense of low cost housing.

I would recomend the low cost housing scheme to all mortgage companies because there are no risks and high profits in a every incresing housing market.

[Krishen Acharia]

Old pensioners are trading to smaller properties to keep down the maintenance, lower council tax and outgoings on utilities. However, there is no suitable property under £250,00 (bungalow) for them to live and at the same time accomodate family whenever they visit. This stamp duty takes a chunk out of little savings they make by trading into a smaller one. It would seem Government never leaves anyone, even at the time of death, not to pay tax of some kind.

[Barbara Steele]

It's much worse than this. It's a tax on mobility and therefore a) vunnerability and b) a mobile flexible workforce. It is often the most vulnerable in sociuety who end up having to move from city to city in search of work. A tax on mobility is also just about the most stupid tax any forward looking Chancellor would want to progress in any reasonable economy.

Barbara