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Property Talk
7th January - Stamp duty ramped up
New Year, new tax rise. The government has increased the number of
properties covered by the 1% tax band by reducing the 0% band from
properties worth up to £175k, down to properties worth up to £125k. So the
stamp duty "holiday" enjoyed by buyers since 8th September 2008 has come to
an end - clearly the government is showing some confidence in prospect of
the country pulling out of recession.
But why does such an archaic tax still impact so massively on today's
society? The answer is that it makes the government large sums of money, and
there is no prospect of any future government (of whatever political
persuasion) turning off that particular income tap. Fair enough. However the
current system just doesn't make any sense. Take the following example. If
you buy a house for £249,999, stamp duty will cost you £2,499.99. Buy a home
for just 1p more at £250,000, and your stamp duty bill will soar to £7,500.
A difference of over £5,000. Ok I've taken the most extreme example, but you
can see the problem. This then creates blockages in the housing market. When
coming to sell, if your property is valued at £265,000, you can’t
realistically put it on at that price, as any buyer worth his salt will
negotiate you down to £249,999 to save himself at least £5,000. So you have
two options: put it on at £249,999, whereupon it will fly off the shelf, or
put it on for an unrealistic £280k-plus, in the hope that you find someone
gullible enough to pay that amount.
So, the big question is - why isn't Stamp Duty tiered like Income Tax?
Surely a system could be introduced so that the government makes just as
much money, but that does not result in price blockages around the band
changes of £125k, £250k, and £500k? Answers on a postcard - or an email -
please.
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