Lender calls for significant change in property tax in the UK

Stamp duty in the UK residential market remains a significant obstacle for house buyers to address and should be reformed, according to one of the country’s leading lenders.

The Yorkshire Building Society is urging the Government to reform the property tax so that it is paid by sellers rather than buyers as this would help more people get onto the housing ladder.

It says that such reform would help first time buyers and those wishing to move up the property ladder while downsizers would pay more having benefitted most from historical house price inflation.

It has calculated that changing property tax rules in this way would save first time buyers in the UK, excluding Scotland, an average of £3,791 with Londoners saving the most at an average of £13,171.

Based on putting away £250 per month, this equates to the average first time buyer avoiding 15 months of saving, or four years and four months in London with the details given in the building society’s formal submission to the Government on what should be included in the Chancellor’s Autumn Statement due in November.

It points out that those moving up the property ladder would also stand to benefit, saving £4,093 on average, rising to £9,762 in London.

A total of 225,200 first time buyers paid stamp duty between June 2015 and June 2016, having purchased a property above the £125,000 minimum threshold, representing 75% of all first time buyers.

The reform would lead to an additional 16,000 additional property sales in the first year, including 6,000 first time buyers, based on a 2% increase in transactions.

It also suggests that new build properties for owner occupation could be exempted from the rules, ensuring the supply of homes is not prevented by the additional tax.

‘More than 200,000 first time buyers paid stamp duty last year and removing this tax burden from them would give the younger generation a major leg up the property ladder. This would be felt most of all in London where on average our members pay a staggering £13,171 in stamp duty for a first home,’ said Andrew McPhillips, chief economist at the Yorkshire Building Society.

‘The benefits would not only be felt by those looking to get on the property ladder as anyone moving up it would be better off too. The Prime Minister has pledged to make intergenerational support a key measure of her Government’s housing agenda and this measure could achieve exactly that,’ he pointed out.

‘This will not solve every cause of the housing crisis but reforming stamp duty could ease its effects by making homes more affordable,’ he added.

Stamp duty generated £7.8 billion for the exchequer between June 2015 and June 2016 and a 2% increase in transactions would generate an additional £156 million.
Earlier this year the Yorkshire Building Society published insight into the views of more than 2,000 people aged 18 to 40 which showed that 69% felt owning their home was essential to feeling they had succeeded in life. However, 49% of non-home owners aged 35 to 40 who still wanted to buy a home thought it was ‘unlikely’ or ‘very unlikely’ that they ever would.

A total of 43% indicated that among the biggest reasons preventing would be first time buyers from getting on the housing ladder were deposits being too high and additional up-front costs associated with a move, including paying stamp duty which this measure would help to ease.