New prime minister Liz Truss and chancellor Kwasi Kwarteng are considering cutting stamp duty, The Times reports.
It is believed the cut will be announced this Friday, 23 September, as part of her cabinet’s mini budget.
Truss has made no secret of her wish to cut taxes in an effort to stimulate the UK economy, with this being a major part of her bid for leadership.
Indeed, visiting New York city yesterday, 20 September, Truss said to US reporters on the subject of taxes: “Lower taxes lead to economic growth, there is no doubt in my mind about that.”
Stamp duty land tax makes up a large proportion of the country’s tax take. Government statistics released today show that stamp duty land tax receipts from April 2022 to August 2022 came to £8.9bn – a £2bn jump on the same period last year.
So far, both lenders and brokers appear lukewarm on this idea. For example, Leeds Building Society chief executive Richard Fearon says: “Cutting stamp duty rates across the board would simply be yet another short-term quick fix that ultimately will make the housing crisis worse not better.
“The prime minister and chancellor rightly want to prioritise growth. But they should deliver that in a much more sustainable way by investing in building enough houses, not funding widespread stamp duty cuts. Using the tax system in this way will pump up house prices which will only exacerbate the problems faced by first time buyers.
“Governments have successively resorted to quick-fix solutions to increase demand rather than address the structural flaws in the housing market and ensure there is enough supply.
Meanwhile, Dimora Mortgages director Jamie Lennox says: “Stamp duty needs a reform without doubt, but a repeat of the 2020 holiday isn’t necessarily the answer as this created a very overheated market with many people paying way more for a property than they saved in stamp duty.
“The other issue is when any stamp holiday stops, it’s like a tap being turned off with a lack of new properties coming to the market. However, with interest rates increasing dramatically since the record lows of 2020/2021, I’m not sure it will have the same impact as last time around.”
She continues: “We’d rather see a reform that brings the nil rate up to the average house price, which increases each year with the house price index. Helping more people buy the average house without paying tax would be far more sustainable in the long run, but maybe that’s too long-term and not a vote winner.”
However, UK Moneyman director Malcolm Davidson argues: “Why should anyone be taxed to buy a family home in the first place? There are plenty of other ways to raise tax revenue without punishing the aspirational.
“The only thing I would say is make it a genuine tax cut, not a holiday, to avoid another ‘cliff-edge’ rush to action. Stamp duty puts homeowners off putting their properties up for sale and this is a major contributing factor in the lack of homes currently on the market.
“If stamp duty were reduced, it ought to encourage more people to sell. Stamp duty is ripe for overhaul. It’s paid by buyers on the asset that someone else has made all the profit on. If it really has to remain, the Treasury ought to consider transferring the charge to the seller.”
And Finanze chief economist Edgar Rayo believes any cut to stamp duty will contribute to a 3% to 4% rise in house prices by the end of 2022. He says: “Despite the cost of living crisis and rising rates, this could reinject buyer confidence into the housing market after the nil rate band returned to £125,000 last year.
“However, properties in different price bands will have varied reactions to the tax cut, as happened in the recent stamp duty holiday. The impact will be felt more on the number of transactions instead.”