As house prices have increased in recent years, a number of players in the industry have called for stamp duty reform.
Most recently NatWest called for the government to offer a rebate on the tax paid when purchasing a property to help fund energy efficiency improvements in homes.
As first reported by City AM, head of mortgages at the bank, Lloyd Cochrane, outlined how the lender is in favour of the government allowing households to reclaim the cost of their energy upgrades against their stamp duty in a two-year window.
Industry bodies like UK Finance have also previously supported the use of financial incentives to encourage people to upgrade the energy efficiency of their homes.
The trade association suggested that an ‘energy efficiency adjusted stamp duty’ could be utilised to increase demand for energy efficient properties and encourage homeowners to retrofit their homes or that centrally-funded council tax incentives could be used to support retrofitting.
Currently, first time buyers pay no stamp duty on properties valued at less than £400,000, while those moving homes pay none on properties valued under £300,000. Beyond this the tax is levied in tiers.
Govt's stamp duty tax bands after "mini" Budget
| Homeowner | First-time buyer | 2nd home | Overseas buyers |
£100,000 | 0 | 0 | £3,000 | £5,000 |
£200,000 | 0 | 0 | £6,000 | £10,000 |
£300,000 | £2,500 | 0 | £11,500 | £17,500 |
£400,000 | £7,500 | 0 | £19,500 | £27,500 |
£500,000 | £12,500 | £3750 | £22,500 | £32,500 |
£600,000 | £17,500 | £8750 | £25,500 | £37,500 |
Source: HW Fisher
Speaking to FTAdviser, R3 Mortgages director, Riz Malik said said using stamp duty for retrofitting is “an excellent, innovative idea” but that it would not work for a number of reasons.
“Firstly, the government although trying to visibly promote energy efficiency is not likely to do it at the expense of its tax revenue. Secondly, administering such a scheme would be exceptionally difficult,” Malik said.
“You would end up having a small number of preferred suppliers being approved and the PPE scandal showed us what happens in those circumstances,” he added.
Adding to these concerns, independent financial adviser at Mather and Murray Financial, Samuel Mather-Holgate said a stamp duty rebate scheme would alienate people who already own their homes.
“Why should someone who is buying a home get the benefit whilst existing owners don't?,” Mather-Holgate said.
Apart from this concern, Mather-Holgate said he supports the idea, partly because stamp duty is too high.
However, he said a scheme would need to go further, include more people and be sure to target those on modest incomes.
Others in the industry agreed with Mather-Holgate’s concern that building a scheme around stamp duty would benefit only those who paid higher stamp duty - ie, those with higher value properties.
