Stamp Duty - why?

Yes, but not exclusively.

Some taxes are levied simply on transactions, whether there is gain or profit or not. Think of VAT, or insurance premium tax.

Not at all.

They could rent. :-)

I think the origin lies in it being a fee for stamping the document which conveys title. Stamping is required in order for the document to be legally recognised, and without this recognition you cannot prove title.

For no particularly good reason, the fee is linked to the value of the transaction.

And there are huge areas of labour voters which are exempt from it.

Yes, I thought of VAT, but in that case the tax began as a luxury goods tax with the justification that if you had enough spare dosh for luxuries then you could pay a little more tax. I guess that would sort of still be the justification.

Now, if two people agreed to exchange luxury goods of equal value then (I'm assuming) there would be no VAT to pay. You can't do that in the case of houses. Also there is no comparable tax when you buy and sell shares or equal value or transfer money between funds. Surely the general principle should be that you're taxed on profit.

A tax on insurance seems just wrong.

But it will have that effect.

:-)

Thanks

Fred

If two people exchange their houses then stamp duty is payable on the difference in value only. Been there, done that.

Matti

not any more I think.

I have also done that , paying stamp duty only on the "consideration" (difference).

However, I believe the rules have since changed so that the stamp duty is paid as if both transactions took place at market value.

Robert

However, I believe the rules have since changed so that the stamp duty is paid as if both transactions took place at market value.

I did it in 2002. Do you have any evidence that it's changed?

Matti

"Matti Lamprhey" wrote

Well, don't forget that Stamp Duty on house purchases was actually abolished in December

It was replaced by "Stamp Duty Land Tax".

Was that more than a name change?

"Ronald Raygun" wrote

I guess. In particular, for the issue above, see:-

Never mind -- it seems that the change to Stamp Duty Land Tax does indeed remove the differencing feature.

Matti

Did it? I remember that in the mid-1970s there used to be two rates of VAT a higher (15%?) for "luxury" goods [charged on nuts and bolts bought at a yacht chandler's] and a lower (8%?) for "normal" stuff [charged on the same nuts and bolts bought at a corner ironmonger's], with some things like food and children's clothing zero rated or exempt.

But that doesn't mean it *began* as a luxury tax. The general principle of sales or turnover tax has been well established in much of the world for quite some time.

Nah.

Of course you can. You can retain ownership, while just allowing each other to occupy each other's houses for the time being.

Well, you pay income tax. Whose profit is that? What difference does it make whether you're taxed on what you earn or on what you spend?

I'm sure one can say that about just about anything.

What do you mean "will have"? SD has existed for long enough that it

But then you lose the Captial Gains Tax exemption (PRR) because the house you own is not your private residence.

Robert

..  >  What difference does it

If you tax people on what they earn you can tax high earners disproportionately more than low earners which is a "good thing".

Robert

"RobertL" wrote

Why is that a "good thing"?

Surely you should tax higher earnings proportionately

It seems obvious to me that it will discourage moving.

Perhaps this effect has been hidden as the tax is not particularly great relative to house price volatility and drift, but the effect has to be there. Paying £20,000 tax every time you move is not something you ignore.

It also seems to me that it would fairer to charge tax on capital gains.

I thought they did that already.

Anyway, fairness doesn't come into it. The whole point of taxation policy is to extract the maximum number of feathers from your goose with the least amount of hiss, and there's not much hiss on this. So, until stamp duty threatens votes it will remain.

Luckily there are comparatively few properties which change hands for more than £500k.

Buyers will take the tax into account when deciding how much they can afford to offer. You might as well say an estate agent's cut "discourages moving", if it is calculated as a percentage of value.

Sure, there is *some* effect, but many people don't pay it out of their immediate pocket, they slap it on the mortgage.

Really? It's not inconceivable that a house selling for £500k next month will have sustained a capital gain of more than £200k under its current ownership. You would rather extract £36k from this via CGT than £20k via SDLT? How is that fairer? How would it "discourage moving" less?

Not on gains in the value of your home they don't.

Oh, but you're only considering your first home. What about all the others?