Stamp duty could be scrapped in favour of a new property tax on homes valued above £500,000 under proposals reportedly under consideration by the Treasury.
Should it be implemented, the new levy would be paid by homeowners when they sell their property. The sum owed would be calculated based on the property’s value, with rates established by the Government.
The proposed system would not replace stamp duty on second homes. The Guardian reports that no definitive decision has been reached on whether these proposals will proceed. Should any modifications be announced by Chancellor Rachel Reeves, it would occur at a fiscal event, such as a Budget.
Under the existing framework, purchasers in England and Northern Ireland pay stamp duty when they buy property valued above £125,000. The threshold rises to £300,000 for first-time buyers, reports the Mirror.
A Treasury spokesperson said: “As set out in the plan for change, the best way to strengthen public finances is by growing the economy – which is our focus. Changes to tax and spend policy are not the only ways of doing this, as seen with our planning reforms, which are expected to grow the economy by £6.8 billion and cut borrowing by £3.4 billion.”
The spokesperson added: “We are committed to keeping taxes for working people as low as possible, which is why at last autumn’s budget, we protected working people’s payslips and kept our promise not to raise the basic, higher or additional rates of income tax, employee national insurance, or VAT.”
Stamp duty rates in England and Northern Ireland
- Purchase price -up to £125,000 (£300,000 for first-time buyers); Rate for main residence -0%
- Purchase price -£125,001 to £250,000; Rate for main residence -2%
- Purchase price -£250,001 to £925,000; Rate for main residence -5%
- Purchase price -£925,001 to £1,500,000; Rate for main residence -10%
- Purchase price -£1,500,000 and above; Rate for main residence -12%
Why is stamp duty paid?
Stamp duty has existed for a long time. It began in England in 1694 as a way to raise funds for war against France, and it was noted as such an effective way of generating income for the government that it stayed.
The Conservative Party under Rishi Sunak briefly introduced a ‘stamp duty holiday’ in an attempt to stimulate the property market during the Covid-19 pandemic. Stamp Duty Land Tax raised £11.6billion for the government between 2023-2024, according to the BBC.
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