06 March 2024 , 07:00
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Pensioners are rattling around in five-bedroom houses while large families are forced to squeeze into tiny properties.
We hear a lot about first-time buyers but what about those further up the chain who are stuck in unsuitable properties because they can’t afford to move. One of the main reasons why people stay where they are is the expense that comes with moving, and it's stamp duty that Brits begrudge paying.
In England and Northern Ireland, no stamp duty is paid if the property is worth under £250,000 or £425,000 if you’re a first time buyer. If the property is worth more than this, you pay 5% in stamp duty on the amount worth between £250,0001 and £925,000, then 10% between £925,001 and £1,500,000 and 12% on anything above £1,500,000.
Michelle Niziol, director and owner of , said the problem is that stamp duty can lead to large families being stuck in tiny homes and pensioners rattling around in massive pads. “I think stamp duty needs to be cut, first time buyers seem to be ok with the level they are purchasing at, they tend to avoid stamp duty which I think Is great."
Stamp duty is stopping some people from moving (AFP via Getty Images)“However, the current stamp duty threshold for people further up the chain is an enormous amount of money and it completely puts people off moving and will cause a huge issue in years to come." Her concerns are echoed by the Institute for Fiscal Studies (IFS) which has blasted stamp duty as a ‘particularly damaging’ tax which “gums up the market”.
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Gail, 58, from Manchester told The Guardian the only thing stopping her and her partner from downsizing from her five bedroom house to a smaller home is stamp duty. “We live in an expensive area, so downsizing will cost us a lot in stamp duty, far more than we would save by having lower bills,” she said.
“We don’t need a five-bed house for the two of us and would like to sell, make use of this capital and buy a smaller four-bedroom house for the interim, because our kids are in their 20s and both renting, so we’d need rooms for them,” she says. “But we paid £60,000 in stamp duty when we bought this house, and it would cost us a fortune again to move to a smaller home in this area.”
Moving house is expensive, not least because of stamp duty (PA)Meanwhile, relief for first-time buyer stamp duty has been in place since the 2022 Mini-budget, but is set to end in 2025. It will reverse the threshold for full relief from paying stamp duty as a first-time buyer from £300k to £425k. Tim Banninster from Rightmove called for the Government to make these changes permanent and consider increasing stamp duty inline with regional variations on property prices.
“At the very least the government should be thinking about making the current changes to first-time buyer stamp duty charges permanent," he said. “However, we think there is an opportunity to go a step further. With such regional variations in property prices, increasing stamp duty thresholds in line with these regional variations would seem a logical first step for stamp duty reform.”
Propertymark believes the Chancellor should consider reducing Stamp Duty on buy-to-let property because it would help meet the huge demand for rented property and incentivise people to become landlords. “By temporarily removing the three per cent surcharge, it would help lessen a landlord’s tax burden and thereby prevent it from being passed on to tenants in the form of surging rents,” a spokesperson said.
“For those aged 55 or over, Propertymark is calling on HM Treasury to remove Stamp Duty Land Tax on any purchases they make. Stamp Duty Land Tax rates such as a five per cent rate on all properties between £250,001-£925,000, and a 10 per cent rate on all properties beyond this price up to the price of £1.5 million, are seen as a hindrance to those who intend to downsize.
Experts are calling for Britain's Chancellor of the Exchequer Jeremy Hunt to slash stamp duty (BBC/AFP via Getty Images)“Removing these Stamp Duty Land Tax rates would enable them to achieve their aspiration of rightsizing as they get older. The Stamp Duty holiday during the pandemic activated in July 2020 enabled families to upsize and relocate – on average people spend £8k when they move so it has huge economic benefits.
Reddit user fackin_shoit says the Stamp Duty system is broken and discourages people from moving. “I don't disagree with Stamp Duty in principal, but the fact you pay the full amount every time you move encourages people to stay where they are for longer,” they wrote.
“There are all sorts of reasons why encouraging people to move is beneficial - stimulating the economy from estate agent fees to paying decorators, freeing up housing stock that might be more appropriate for others. There must be a better system?"