Playing with Stamp Duty rates has been the pastime of many former Chancellors over the past eight years, ever since the hapless Osborne (pictured) decided to convert the system from a ‘slab-sided’ to a ‘sliced’ version in 2014.
The rates at the higher end, particularly for people with more than one house and then more recently, of foreign origin, are now 17% and for a long time these changes resulted in a lower tax-take for the Treasury, quite apart from the distorting effect that it had on the number of sales which took place.
Values of expensive properties dropped by 30-40% in some cases, and estate agents complained at the time that selling a more valuable property was akin to ‘swimming through sago pudding.’
As a direct result, this spawned the birth of the uber-tenant’ where international former purchasers decided to rent the properties that otherwise they would have bought. Instead of paying the government the equivalent of 20% (with estate agents and solicitors fees) stamp duty for five years, they could rent the same property care of the government, which is the unintended consequence of this tax regime.
The temporary change of the Stamp Duty-free holiday – up to £ 500,000 – did boost the market during the covid period, which was a welcome relief for the first-time buyer, particularly in the capital.
I presume that any changes that the new Chancellor, Kwasi Kwarteng (pictured), will introduce on Friday this week, will be at the lower end and this could induce some frenzied buying, whilst it is being offered.
Although it may not be very popular amongst the class war warriors, reducing the Stamp Duty rates at the higher end may not necessarily cost the Exchequer a farthing. The increase in activity could provide enough revenue, in order to self-fund this tax giveaway.
Any of these changes will certainly have a galvanising effect on the white and brown goods industry, as well as providing a helpful stimulus to the building industry, which has become far quieter of late as consumer demand slows which is a direct consequence of higher interest and mortgage rates, not assisted by fears of the looming recession.
Stamp Duty is an easy and quick accelerator for demand, at a judicious time for the UK economy.