On Monday 22nd July, Onward publishes ‘Reforming Stamp Duty: New ideas to promote home ownership’ by Chris Philp MP, former PPS to the Treasury and Guy Miscampbell, Senior Research Fellow at Onward. The report is edited by Will Tanner.
The report argues that the new Prime Minister should help more than three quarters of a million people move up the property ladder by abolishing Stamp Duty on all but the most expensive tenth of homes.
In a paper for Onward, Chris Philp MP and Guy Miscampbell set out proposals to take homes worth £500,000 or less out of Stamp Duty Land Tax altogether, removing Stamp Duty entirely from 770,000 primary house purchases a year.
This would save a normal family buying an average priced home of £228,000 around £2,080 on their purchase. This saving rises to £12,850 if they were buying an average priced house in London of £457,000. This is equivalent to half a typical 5 per cent deposit.
Onward’s proposals echo commitments made by candidates in the Conservative leadership race, but the thinktank goes further by proposing to halve Stamp Duty on all primary residences above £500,000. This would halve the Stamp Duty Land Tax (SDLT) burden for a further 85,000 homes and further reduce the distortive approach of SDLT on the housing market.
Importantly, the report sets out how the next Prime Minister could pay for such a significant tax cut, which would cost £3.3 billion a year based on a detailed analysis of Treasury SDLT revenue statistics. Onward proposes paying for the reforms by levying surcharges on types of property that are either under-taxed or where there is clear public support. These include:
- A new 1% annual tax on the value of homes left empty for more than 6 months in a year. This would raise £645m per annum.
- A rise in the current 3% stamp duty surcharge on second homes and investment properties to 5%. This raises £790m per annum.
- A new 3% stamp duty surcharge of non-UK resident buyers of residential property. This raises £540m per annum.
- A new higher band of council tax for more expensive properties. This raises £173m per annum.
- An end to all council tax reliefs for vacant and second home property. This raises £75m per annum.
- A higher stamp duty band of 8% (up from 5%) for the portion of commercial property purchases over £1 million. This raises £682m per annum.
- A new stamp duty levy on residential properties transferred by selling the company that owns them. This raises £175m per annum.
- A doubling of the Annual Taxation on Enveloped Dwellings. This raises £140m per annum.
These changes would raise £3.2 billion, making stamp duty cuts for owner occupiers effectively cost neutral overall and ensuring the new Prime Minister would not have to increase the deficit to give prospective homeowners a stamp duty break.
Chris Philp MP, co-author, said:
“It is essential that the next Prime Minister takes early action to back homeownership and tear down the biggest barrier to hardworking people getting on the property ladder by radically cutting stamp duty.
“These stamp duty cuts are designed to kick-start the home ownership dream – just as Thatcher did in the 1980s. 86% of the public want to own their own home, yet only 63% do. They will help first time buyers, down-sizers, up-sizers and people needing to move for work.
“These reforms will get the whole housing market moving – and help make sure we are making the best use of housing stock by making it easier for older people in large houses to move, allowing growing families to move in.”
Will Tanner, Director of Onward, says:
“Stamp duty is a bad tax. It creates friction in the housing market, preventing people from buying their first home, moving for work, or downsizing to free up housing stock for families.
“The next Prime Minister should be bold: take all but the most expensive properties out of stamp duty and pay for it with fairer taxes on empty, foreign or expensive properties. If they don’t, the Conservative dream of a property owning democracy will get further and further away.”
For media inquiries, contact Will Tanner at [email protected] or 07958 383 223.