Calls grow to reform ALL property taxes, not just stamp duty
Pressure is building for widespread property tax reform beyond short term issues regarding stamp duty. Many MPs in this week’s 65-minute special debate on the stamp duty holiday spoke for an extension to the deadline in the short term, and a more fundamental reform in the longer term.
Now the issue has been taken up by Caspar Harvard-Walls of the buying agency Black Brick. He says a simplified system of property taxation generally would be welcome.
“Shifting away from punitively high stamp duty rates at the top of the market to a property tax could encourage the older generation in large family houses to sell. This would both release family homes back into the system and fresh capital” he says.
“With the seven-year relief still in place for inheritance tax gifts, the younger generation could then benefit from freed up equity and lower stamp duty charges to trade up. The cost of downsizing right now is just too prohibitive but older owners are sitting on huge unrealized capital gains” Harvard-Walls continues.
And he adds: “There is a need to unblock the market and scrapping stamp duty could help to achieve this. People are not selling but we need plenty of transactions for a healthy market.”
Two months ago a new group of Conservative MPs - including the outgoing chairman of Hunters Group, Kevin Hollinrake - launched under the title of the Property Research Group.
Hollinrake says there is a need to investigate “the whole landscape of property tax” - a point he repeated in this week’s debate on the stamp duty holiday extension.
The PRG is particularly concerned about council tax, which Hollinrake says has a disproportionately higher impact on younger and poorer people in low value homes.
And Conservative MP John Stevenson, who represents Carlisle, says on the Conservative Home website that widespread property tax changes would help his party keep the so-called ‘Red Wall’ constituencies at the next General Election.
“The two obvious examples which irritate people from every walk of life are council tax and stamp duty” he writes.
He argues that council tax is based on property values from 1991 so is 30 years out of date in its application and losing favour with the public. Meanwhile stamp duty is, he says, “an attack on aspiration and ownership” hitting everyone from first time buyers to downsizers.
“A fairer system would be to completely abolish both council tax and stamp duty and replace them with a new property tax which reflects the current value of people’s homes. A proportional property tax if you will” suggests Stevenson.
“By setting that tax rate at 0.48 per cent the campaign group, Fairer Share, has calculated that over three quarters of households would be instantly better off … From a political perspective, 97 per cent of households located in the ‘Red Wall’ seats in England that the Conservatives took from Labour at the last election, would be better off. Traditional Tory seats would also fare well from this policy” he adds.
All these calls for reform come after two recent heavyweight reports on the subject.
Last year the Office for Tax Simplification, acting on the instruction of Chancellor Rishi Sunak, looked at whether Capital Gains Tax could be simplified and made more fit for purpose.
The OTS subsequently called for an increase to CGT in line with income tax rates, and a reduction in the annual allowance.
Specifically the OTS recommended CGT for buy to let properties and holiday homes to rise to 20 per cent for basic rate taxpayers and 40 per cent for high rate tax payers, with the annual allowance for CGT plummeting from £12,300 to £2,000.
And more recently the Wealth Tax Commission has proposed a one-off tax on individuals with assets over £500,000, or £1m for couples, to help fill 'black holes’ in public finances caused by Coronavirus measures.
The Commission wants assets to include property wealth and property law firm Mishcon de Reya says: “Many are already asking whether they are outside the scope of a potential wealth tax, and if so, whether they can take any action to mitigate its effect … Speculation is rife as to whether the government will follow the recommendations of the report in the upcoming Budget.”
