• In a poll, 38% said they wanted stamp duty to be replaced with capital gains tax
  • Stamp duty is a tax on buying property while capital gains is a tax on selling

A survey has found that there is strong demand for Stamp Duty Land Tax (SDLT) to be reformed or replaced among homemovers.

The Anthony Ward Thomas Attitudes to Moving survey asked 2,000 home movers several questions about their experience of moving and their thoughts on the housing market.

The survey found 38% of respondents think SDLT should be replaced by capital gains tax on all sales.

58% also believed that first time buyers should be wholly exempt from SDLT, a step beyond the current exemption on purchases below £300,000 for first time buyers.

Four in ten people say that stamp duty should be scrapped completely and replaced with a capital gains tax on home owners’ profits, a survey says.

Such a move would be highly controversial, as while it shifts the tax burden from buyers to sellers who have profited from home ownership, it could lead to them paying a 28 per cent rate on gains potentially running into hundreds of thousands of pounds.

Such a move would change it from a tax on buying property to a tax on selling a main property.

The survey also said more than half of respondents – at 59 per cent – believe all first-time buyers should be completely exempt from stamp duty, extending the current zero per cent rate from its up to £300,000 level at the moment.

Anthony Ward Thomas, of Anthony Ward Thomas removals, said: ‘First-time buyers are the lifeblood of the housing market and we need plenty of them to keep everything functioning smoothly further up the ladder.

‘However, the cost of moving is in danger of running away from them – it’s not just about finding a deposit and having a big enough salary to get the mortgage you need, there are all the other moving costs, such as stamp duty.

‘Replacing a tax on buying – stamp duty – with one on selling – Capital Gains Tax – makes a lot of sense.

‘Buyers will already have profited from the increase in value of their home so paying a tax on that, rather than at the point of entry, seems much fairer.’

Anthony Ward Thomas, founder of Anthony Ward Thomas removals, said:

“First-time buyers are the lifeblood of the housing market, and we need plenty of them to keep everything functioning smoothly further up the ladder. However, the cost of moving is in danger of running away from them – it’s not just about finding a deposit and having a big enough salary to get the mortgage you need, there are all the other moving costs, such as stamp duty.

Replacing a tax on buying – stamp duty – with one on selling – CGT – makes a lot of sense. Buyers will already have profited from the increase in value of their home so paying a tax on that, rather than at the point of entry, seems much fairer.”

Results from the survey – in which 28 per cent of those polled had moved in the past year – suggested the tax changes would help with the increasing cost of buying a home.

The study called for first-time buyers to be made exempt from paying any stamp duty.

First-time buyers are already exempt from any stamp duty up to £300,000. However, with rapid house price inflation in recent times, first-time buyers in an increasing number of locations may be paying more than this.

Tinkering with stamp duty can be highly controversial, it often involves some people paying more than before and has tax holidays have repeatedly been blamed for skewing the market.

Moving to a capital gains tax on homeowners would prove even more divisive, with those at the top of the property ladder sitting on long-term gains often running into hundreds of thousands of pounds.

Capital gains tax is currently paid on property at rates of 28 per cent for higher-rate tax payers, and 18 per cent for lower rate taxpayers. However, main homes are exempt from capital gains tax through Private Residence Relief.

What tax would selling pay if main residence relief is scrapped?

A leading accountant has calculated how much tax a person selling a £500,000 property would pay if main residence relief was scrapped.

There are currently no proposals to change how main residence relief operates.

However, if such a change was introduced, accountant Blick Rothenberg has worked some figures to explain how it would work.

It explained that if the Government scrapped main residence relief, someone selling their home for £500,000 and realising a capital gain of £150,000 – assuming they bought the property for £350,000 – , would have a capital gains tax liability of £38,556.

This is calculated by taking the capital gain of £150,000 and deducting the capital gains annual exemption of £12,300. The gain is then taxed at 28 per cent.

The 28 per cent capital gains tax rate applies after the basic rate tax band of £37,700 has been used, which would also include any income the person earns.

For this example, the individual has a salary which has fully used their basic rate band and therefore the gain would be wholly taxed at 28 per cent.

Under the current stamp duty land tax rules, a person buying a property for £500,000 would pay stamp duty of £15,000.

Nimesh Shah, of Blick Rothenberg, said: ‘Any move to scrap main residence relief would be controversial and met with severe resistance.

‘Pushing the tax burden on to sellers rather than buyers is likely to act as a deterrent to move home.

‘People have long relied on main residence relief to climb the housing ladder, by banking tax-free capital gains, and reinvesting in a larger property.

‘The exact proposals to re-design the tax system would require careful thought – in my view, it would be unfair to entirely abolish main residence relief and one option is to have a lifetime limit on tax-free capital gains on residential property – irrespective of whether the property is your main residence or not.

‘In addition, the Government would need to introduce a form of taper relief whereby the taxable gain is reduced depending on how long the property has been owned for.’

Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: ‘The most important consideration when contemplating any changes to the housing market is what will be the consequences for transactions.

‘As it is, stamp duty thresholds have not kept up with inflation; the net result is that Government coffers have been swelled by the significant increase in transaction numbers over the past year, more than making up for the stamp duty holiday.

‘The situation is likely to change now with the rise in cost of living having an impact on activity and transaction numbers. The Government is unlikely to want to compromise a nice little earner unless it can be shown that it might earn at least as much, or even more, by changing the current system.

‘In terms of replacing stamp duty on purchases with capital gains tax on sales, there is some merit in the notion that those who have made the gain should bear the brunt of the cost.

‘The idea needs more research to ensure it wouldn’t compromise the market and first-time buyers in particular. There has to be some sort of taper relief so that it doesn’t become a deterrent to moving; if it becomes a tax on mobility, then it will become self-defeating.’

The stamp duty burden

The amount of stamp duty that buyers pay has risen following a sharp rise in house prices.

While no stamp duty is paid on homes up to the value of £125,000, the rise in house prices has pushed many properties for sale beyond this initial stamp duty tax threshold.

It means far more homebuyers are having to pay stamp duty – and more of it.

This is because stamp duty rates are charged as a percentage of the value of a property in certain brackets.

The percentage charged in these brackets rises as the value of a property increases.

A Treasury source said that while it keeps all taxes under review, it has ‘no current plans’ to make main homes pay capital gains tax.

There have been many changes to stamp duty in recent years, including the abolition of the old ‘slab system’, where rising percentages were charged on the full cost of a property.

There was also the introduction of a 3 per cent surcharge for those buying a second home or investment property.

In the Covid pandemic, there was a recent stamp duty holiday to help homebuyers and to boost the property market during the pandemic.

The tax was zero rated on the first £500,000 of a property’s purchase price.

This meant that buyers completing a purchase on a property for less than £500,000 before July 1, 2021 paid no stamp duty, while those buying more expensive homes also saved a substantial chunk of their tax bill.

COMMENT:

Successive governments have quietly supported the rise in property prices, because they gain in several ways.

Death Tax:  Modern inheritance tax dates back to 1894 when the government introduced estate duty, a tax on the capital value of land, in a bid to raise money to pay off a £4m government deficit.

It replaced several different inheritance taxes, including the 1796 tax on estates introduced to help fund the war against Napoleon. The earliest death duty can be traced back to 1694 when probate duty, a tax on personal property in wills proved in court, was brought in.

In reality, it was introduce to slowly erode the wealth of the aristocracy, (allegedly) but for the main part, it did not have any effect on them, as those who own 20/30,000 acres and so on, invariably use the land for farming and that is exempt. Obviously the very wealthy are and always have been in a position to make arrangements to endure that their wealth is either exempt or transferred to their heirs long before the seven year rule (if you die within seven years of giving away your estate, it is liable for Death Tax on a sliding scale).

In 1993, the tax raised just over £1bn, rising to close to £4bn in 2008 as property prices soared. After the financial crash and the introduction of measures that allowed couples and civil partners to share their tax allowances, receipts slid back to £2.4bn in 2010, but since then they have been building again.

Financial Services: As the value of property has risen dramatically, the average mortgage has also risen along with it, creating massive profits for banks, who are also taxed. Since the crash of 2008, when the base rate fell to below 1%, the willingness of people to borrow ever-larger amounts, because the cost of borrowing has been so low, has put more people in greater danger than ever. Sadly, interest rates are never set in stone, no matter what the economic climate is today, things can change and rates can rise. The lower the rate, the greater the effect of any rise, as it represents a greater percentage of what they are currently paying. A rise from 8% to 10% is a rise of 25% but a rise from 2% to 4% is a rise of 100%..

Stamp Duty: When stamp duty was reformed in December 2014, the changes were in fact very significant, taking the highest rate to 12%  for property over £1,500,000, but then they added more on top, an extra 3% for those buying an additional home, (even if their existing home is abroad) then, if that was not enough, they added another 2% for overseas residents, which came in to force in April 2021, taking the maximum rate to an eye-watering 17%. This is absolutely ridiculous, if you take in to account that in many parts of London, a reasonable terraced house can be well over a million!

The consequence of this has been that the top end of the market has been castrated ever since, with sales of property at the high end in London floundering, in fact, there are many high-end developments struggling to find buyers.

Capital Gains Tax: I have long suspected that the Government is dying to get its hands on the vast combined wealth of homeowners, perhaps they are creating a situation where the masses will support a change to Capital Gains Tax, but this will be a financial change of Orwellian magnitude. It will basically allow the Government to get its grubby hands on the hard earned wealth of average people, who have made many sacrifices to buy, maintain and pay for their home, hoping to have something to sell in their old age or give to their children.

I believe that Capital Gains Tax, especially at the current rent is a punitive tax for hard working people, they may try to sway public opinion by introducing the tax at a reduced rate, but as we know, they cannot be trusted to incrementally raise the rates until they have the legal right to steal everything that innocent people have worked for.

This, at a time when the multinationals like Amazon and Starbucks operate in a manner where paying tax is an option, this is not fair. I do not agree with this strategy, I actually find it abhorrent.

Capital Gains Tax on private homes, will stop people moving home, it will contribute to the creation of a Dystopian world, where the elite will own all the property, registered in corporations of course and the average person will be beholden to them, which is reminiscent of the ‘Serfs’ in pre-revolutionary Russia.