OpinionSep 17 2014

Does gov’t care enough to re-evaluate stamp duty?

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Some MPs do understand what it is like to be a mere mortal struggling to buy a home.

St Albans Tory MP Anne Main has branded stamp duty land tax a “middle class postcode tax”. This nicely hits the nail on the head.

While it is more or less unavoidable in much of the south of England, it is rarely paid by first-time buyers in the north. The tax comes in at 1 per cent on properties selling for more than £125,000 and goes up to 3 per cent on the whole price of those costing more than £250,000.

Halifax house price data shows the average price of a detached house in the north of England is £236,319. In the south east, the average terrace comes in at £220,680 while in Greater London the average flat is £328,771.

Ms Main calculated that someone living in St Albans might pay £64,830 in stamp duty if they bought four houses in their lifetime; that is, more than two years’ take-home pay for the average constituent.

My view is that stamp duty does not merely need tweaking by increasing the threshold before it is charged. It should be replaced with a more progressive tax. Instead of higher rates being charged on the whole value of the property, they should only be charged on any amount above a specific threshold.

Stamp duty should be replaced with a more progressive tax.

Under the current regime, anyone paying £260,000 for a property gets hit with a £7,800 bill. A more progressive taxation regime retaining existing thresholds would charge £1,550.

The barrier to reform is that SDLT raised £9.3bn in 2013/14. A Conservative Treasury minister says raising the threshold to £500,000 could slash revenues by £4.2bn.

But this does not make it right to preserve a tax that effectively punishes young people, including essential modestly paid workers such as nurses and teachers, for living in the south east.

There is an argument that the gap could be plugged by a form of capital gains tax on sales. This would at least raise the tax when cash is more likely to be available.

Of course, it would be seen as double-taxation of those who paid stamp duty when they bought and are taxed again when they choose to trade up or down.

But any objective analysis could not help but conclude that the status quo is neither sensible nor fair. The question is whether enough politicians will be concerned enough to push to real reform.

Show savers a bit of respect

Spare a thought for the poor cash saver. They alone are still carrying the burden of the great financial meltdown.

Wait a minute, I hear you say: it is their choice. They could be part of the stockmarket party if they wished. I disagree.

Take my brother. He is 65 and worked as a train driver for most of his life. His occupational pension will provide a fairly comfortable retirement. He will not have a boat to sail, but he does own a small caravan.

He has just received his pension lump sum and has no idea what to do with it. Like many people of his age – and dare I say class – he is scared witless of the stockmarket.

The idea that he could lose some of the money he has spent a lifetime accumulating, and would be unable to replace, is too much to contemplate.

In the old days, he would probably have seen a financial adviser at his bank and been stripped of a decent proportion of his savings in commission.

For now, he is scratching around for 1.4 per cent as building societies continue to cut rates and to prevent savers from getting the best deals on cash Isa savings they have accumulated.

The only sign of competition on the horizon are the National Savings & Investments pensioners bonds, coming next year. Prepare for much whingeing from building societies if these offer the 4 per cent over three years that has been mentioned.

So let me pre-empt this. If you want to keep your savers – try showing them some respect.

The price of a good school zone

A good school has always been key part of families choosing a home. But Confused.com is now suggesting that one in 10 parents is willing to pay upwards of £50,000 extra to be close to the right school.

Perhaps that is not a lot. Putting one child through the first six years of private schooling in Maidenhead could cost £66,000, says Confused.

So that property premium is soon outweighed by the free education.

But Confused missed one key point. Over the next 20 years the property will increase your assets, while your children will do their best to strip them.

Tony Hazell writes for the Daily Mail’s Money Mail section

t.hazell@gmail.com