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  • Tax

    Stamp duty cut could fire up property market



    A new analysis of stamp duty suggests that a cut of around a third in SDLT could produce a 40 per cent surge in transactions.

    Boris Johnson has made several broad claims that he wants stamp duty to be cut during his premiership, with government insiders saying this could mean the total abolition of SDLT on residential property transactions up to £500,000.

    An analysis of what this could mean has now been undertaken by the chief executive of buying agency Ludgrove, Fraser Slater, who is also a former City fund manager.

    Unlike some previous studies that purely focus on the impact a cut in tax rates would have on stamp duty receipts itself, the Ludgrove analysis looks at the impact on total tax revenues.

    Slater says that by including an estimate of indirect taxes from property related activity - for example VAT, and corporation and employment taxes from estate agencies, conveyancers and removal firms amongst others - the analysis achieves a more accurate assessment of what a stamp duty cut would mean for total tax revenue.

    Ludgrove’s favoured analysis says that a 36 per cent reduction in stamp duty rates across the board could mean a huge 40 per cent rise in residential transactions in England alone per year.

    That would in turn generate an extra £1.44 billion in tax revenue and £8.36 billion in business revenue. So taken together this would mean a £9.8 billion boom for the economy and the Treasury.

    Full/source article 

    This is good intel and the same argument for the removal of Section 24.  More tax would be made by landlords using property-related products and services, while at the same time supporting the economy and business.

    SEE ALSO  -         Boris Johnson - Stamp Duty reform

    UP NEXT -             Boris calls for cuts in Stamp Duty and CGT

    DON'T MISS -        Landlord life with Boris at No. 10 ... ?

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    Thanks Vanessa, a very interesting read! Big fan of the site and this is my first comment.

    It would be very welcome to see the reduction of stamp duty. Do you think it will be a blanket reduction across the market, or only be offered to first time buyers, or just those with a single residence?

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    Hi Pete and welcome.  Thanks for commenting.

    I don't think anyone knows for sure at this stage, but I got the impression that it would be a blanket cut.  Very good news for landlords and buy to sellers if that proves to be the case.

    We're unlikely to know anything in the near future due to the parliamentary summer recess and the issue of dealing with Brexit, but stamp duty reform is definitely on Boris's radar - that is all we know for sure!

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    Only good news, if the result means the same total amount of tax is collected surely? This is only a forecast...

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    I thought Boris may have been different with statements like 'uniting the kingdom' and 'boosting the economies of Scotland, Wales and Northern Ireland'.
    It appears that he has defaulted to the Westminster norm by announcing changes to SDLT.
    I could forgive the slip up between using Stamp Duty and SDLT, but as soon as I saw £125k it was clear that LTT and LBTT have not been considered.
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    A good teacher must know the rules; a good pupil, the exceptions.

    Martin H. Fischer

    This plays right into the theory of the Laffer curve, see Wikipedia here 

    But as a synopsis;

    "In economics, the Laffer curve illustrates a theoretical relationship between rates of taxation and the resulting levels of government revenue. It illustrates the concept of taxable income elasticity—i.e., taxable income changes in response to changes in the rate of taxation."

    Sometimes higher taxes really aren't the answer if your goal is to raise revenue. That said taxes are generally there for two reasons

    1. To curtail behaviour such as smoking with tobacco duty and a reduction in carbon emissions with fuel duty
    2. To raise revenue for the state

    The problem with SDLT and S24 they were apparently introduced to curtail behaviour. Which we would all agree has worked with SDLT tax receipts falling.

    My concern is, would the PM see the benefit of tax revenue over that of the apparent need to curtail behaviour. Couple that with the bad press of being soft on landlords it is really going to be a difficult sell for anyone to reverse these two ridiculous taxes..

    Finally as your pieceice makes clear tax revenue would indeed rise. The only issue with this is the majority of the population would not understand it and therefore just assume he was giving a tax break to the wealthy.

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    Landlord with 25 years’ experience in the property market and a specialist in tenant referencing, ID and credit screening. Creator of identity, credit and anti-money laundering system ValidID.co.uk


    Stamp duty cut or not the property market is going to get fired up over the next 5 years anyway. Prices will more than double in the North of England.

    Trust me. I know what I'm talking about. Buy, buy, buy!!!

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    Are wages gonna double in the North over next 5 yrs?

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    No. There are many factors that are more important in terms of house price growth.
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    Which other factors?

    Vast majority of new mortgages are now for residential loans - not BTL.

    CML data nationally shows average FTB borrows just 3.11 x household income of average £38000 - net result of tight MMR constraints. They also have average 17%/£24000 deposits. In London the figures are 3.8 x £60k income with £100k deposits.

    UK has over 25% of workers in part time jobs (8 million plus). ONS data flags that when London wages are excluded from UK total the average wage outside London is just £17550.

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    I'll PM you with the necessary educational resources to start your journey of enlightenment.

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