Three days: that’s how long it took for our new chancellor to ‘not rule’ something out before, well, ruling it out.
Hopefully, this is not an indictment of how Sajid Javid is going to run the country’s books, as so far he has shown the backbone of a particularly flaccid jelly in standing by his own comments.
In an interview with The Times newspaper, Javid claimed that he is a ‘low tax guy’, and that he was considering rewriting the rule book on UK property purchases – specifically, reversing the law that says that buyers are responsible for paying stamp duty (unless they are a first time buyer).
In his vision of property market utopia, Javid planned to reverse stamp duty charges so that they are paid by the seller instead.
The policy change was said to have been favoured by Boris Johnson during his campaign to be elected as the new prime minister, and Javid repeatedly refused to rule out the stamp duty reversal.
When quizzed about the proposal, the chancellor said: “I’m looking at various options. I’m a low-tax guy. I want to see simpler taxes.”
He also went on to intimate, without saying as such literally, that low paid workers would be first in-line for a tax cut as he prepared his first budget in office.
“We want to set them [taxes] at a rate where we are trying to maximise revenue, and that doesn’t always mean that you have the highest tax rate possible,” Javid said. “Generally, I want to see lower taxes, but at a level that is going to pay for the public services.”
It was all positive stuff for potential first time buyers on low income, but then the first law of politics reared its head: you can always deny you said anything of the sort when later questioned on it.
Changing Like the Wind
Javid’s planned stamp duty reversal was first reported on the Friday, and yet by Monday he denied that he was planning any changes whatsoever.
The chancellor took to Twitter – where else in this modern world of politics – to ccategorically state he had never said such a thing at all.
“More speculation about stamp duty this morning. To be clear, I never said to @thetimes I was planning to put it on sellers, and I wouldn’t support that. I know from @mhclg [the Ministry of Housing, Communities and Local Government] that we need bold measures on housing – but this isn’t one of them,” was what he posted @sajiddavid.
There is an argument for both sides of the equation. By removing the cost of stamp duty, which typically runs into the thousands, low income couples and families will be aided in their quest to climb the property ladder with their second or third property purchase.
It’s a philosophy advocated by the Association of Accounting Technicians (AAT), who believe that switching stamp duty costs from buyer to seller would be ‘fairer, simpler, more effective and cheaper than the current regime’.
However, the counter argument is that the seller would simply look to cover the cost of stamp duty by putting their property on the market for a higher price – thus increasing the amount of deposit and/or mortgage that a buyer would need.
Either way, it’s good to see our (un)elected representatives sticking to their guns and standing by a comment they made just 72 hours previously….
What is Stamp Duty?
As if buying a new home wasn’t stressful and financially challenging enough, the government decided to implement stamp duty as a tax on the already-stretched finances of buyers.
In England and Northern Ireland it is essentially the old Land Tax, while in Scotland it is known as Land and Buildings Transaction Tax and in Wales the Land Transaction Tax.
In England, you have to pay stamp duty on properties valued at £125,000 or higher, with rates ranging from 2% from £125k-£250k up to 12% on properties valued at over £1.5million (we can but dream).
Stamp Duty Rates (gov.uk)
So, if you are buying a home for £250,000, you will have to also fork out £2,500 in stamp duty (zero on the first £125,000 and then 2% on the next £125,000).
| House Price | Stamp Duty | Effective Tax Rate |
|---|---|---|
| £250,000 | £2,500 | 1% |
| £500,000 | £15,000 | 3% |
| £750,000 | £27,500 | 3.67% |
| £1,000,000 | £43,750 | 4.38% |
| £1,250,000 | £68,750 | 5.50% |
| £1,500,000 | £93,750 | 6.35% |
| £1,750,000 | £123,750 | 7.07% |
| £2,000,000 | £153,750 | 7.69% |
| £3,000,000 | £273,750 | 9.13% |
| £4,000,000 | £393,750 | 9.84% |
| £5,000,000 | £513,750 | 10.28% |
| £10,000,000 | £1,113,750 | 11.14% |
In a property market already brought to its knees by Brexit, stamp duty just makes the process of raising finance to buy a new home even more difficult.
Do First Time Buyers Pay Stamp Duty?
Here’s some rare good news: stamp duty was abolished for first time buyers back in 2017. So, if you are purchasing your first property, that’s one less thing to worry about.
There are some caveats, however. Stamp duty is only wiped out on properties worth up to £300,000 – a penny over that and you’re looking at a 5% rate to be paid up to the £500k mark.
