Flawed ideas to replace property stamp duty

The last few days have seen property stamp duty hit the headlines with the Chancellor of the Exchequer apparently suggesting this may be switched from buyers to sellers. While these headlines have since been refuted by the Chancellor it has opened a very interesting debate regarding this often excessive charge.

Current stamp duty scale

In recent times there has been a rise in the stamp duty exemption threshold. This has proven a useful means of protecting those in relatively low value properties as well as encouraging first-time buyers. The basic stamp duty scale is as follows:-

• 0% up to £125,000
• 2% between £125,000 and £250,000
• 5% between £250,000 and £925,000
• 10% between £925,000 and £1.5 million
• 12% over £1.5 million

Since 2017 first-time buyers have been removed from the stamp duty taxation system for properties valued up to £300,000. As a consequence, it is not difficult to see that the current system penalises those towards the higher end of the property market. While this has not always been the case, recently politicians have decided it is perfectly valid to tax the rich to plug budget black holes.

Should the government increase the 0% stamp duty threshold?

Some experts believe it is now time to increase the 0% stamp duty threshold to £500,000. When you consider that the average property in the UK is worth around £228,000, while London prices average £457,000, it is not difficult to see the positive benefit this would likely have on activity and liquidity. However, there would be a significant drop in property stamp duty tax income at a time when the UK government is still battling to balance the books.

Would stamp duty tax rates on luxury properties need to increase to make up for the shortfall further down the property value ladder?

Removing capital gains exemption for main properties

While we all pay capital gains tax on investment profits has anyone actually sat back and wondered why we pay capital gains tax? How can the government justify a tax on successful investments and why should successful investors be penalised? They say that an Englishman’s home is his “castle” and it is safe to say that property investors would be up in arms if the current capital gains tax exemption for main properties were removed.

The system would simply revert back to the traditional capital gains tax allowance for individuals and an appropriate charge on any property profits. However, those with significant wealth may look to acquire their properties in limited companies and utilise what would be a more beneficial tax system compared to individual property ownership. There is also one other issue to take into account!

Why sell a property to crystallise a large capital gain?

If the capital gains tax exemption on main residences was removed then it is safe to say that those with significant capital gains would simply remain in their home. This would avoid a sale which would trigger a capital gains tax liability and payment to the Treasury. We can only estimate the huge impact this would have on liquidity in the UK housing market. If those looking to upsize or downsize simply decided to remain in their properties, this would have a massive impact on property stock levels.


Whether stamp duty is eventually switched from the buyer to the seller, or split between the two parties, or possibly removed altogether is debatable. If we look at the proposals to remove capital gains exemption on main residence the huge knock-on impact of the market would be a game changer. So, while many of these experts “mean well” it would appear that some have not quite grasped the potential knock-on effects these changes would have.

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