Since 1 January 2010 Stamp Duty has returned to the same levels that existed prior to the temporary “holiday”.
The Council of Mortgage Lenders (CML) are advocating a change in the basis by which Stamp Duty is levied because the current method distorts the property market with clustering just below the thresholds at which the various tax rates start.
It is difficult to see the logic or the equity in the present system where the buyer pays £2,500 stamp duty on a house costing £250,000 but pays £7,500 on a house costing £250,001.
CML’s proposal is to levy tax at the rates applicable for each slice of the purchase price.
| Purchase price (£) |
Rate |
Existing basis |
Proposed basis |
| 150,000 |
0% |
0 |
0 |
| 250,000 |
1% |
2,500 |
1,250 |
| 500,000 |
3% |
15,000 |
8,750 |
| 1,000,000 |
4% |
40,000 |
28,750 |
The proposal makes a lot of sense particularly when house prices are influenced by government policies. A small increase in market values can have a severe impact on the Stamp Duty paid.
The same method could be applied to commercial property.
If these proposals were to be implemented I suspect that the rates would go up but at least it would avoid the sudden jumps which add to the pressures on buyers at a time when larger deposits are required.