Anyone who has ever bought a property will be familiar with the task of paying stamp duty on the purchase price. However, if the wishes of one major mortgage lender are granted, it could eventually be sellers who pay the tax.
This is the latest development to hit the news headlines in the mortgage market this week. The idea was mooted by the Yorkshire Building Society. Furthermore, it has gone as far as suggesting this to the Government.
Why change from taxing buyers to taxing sellers?
The idea is that it would make buying a home cheaper for some people. The big benefit would be felt by first-time buyers, who would not be selling their current home in order to buy a new one. Since they are only buying and not selling, they would not therefore be liable to pay stamp duty.
According to the figures the building society has come up with, around 16,000 additional transactions could be seen in the first 12 months. Approximately 6,000 of those would be people getting onto the housing ladder for the first time.
How does stamp duty work?
Stamp duty is actually cheaper now than it was in the past, at least for those at the lower end of the property market (i.e. buying properties worth less than about a million pounds). The tax is now paid according to a number of price bands.
Nothing is due to be paid on properties worth up to £125,000. However, above this a 2% charge is levied between £125,001 and £250,000. There is then a large price bracket from £250,001 up to £925,000, in which a 5% charge is levied. A 10% charge is paid between £925,001 and £1.5 million, while anything over that receives a stamp duty of 12%.
A property will incur the tax in more than one band. For example, if someone buys a property worth £249,000, they won’t pay any stamp duty on the first £125,000 of the price. However, the remaining portion of the price will incur a duty of £2,480. Someone buying a property worth over £1.5 million would pay the four rates of tax, each applicable to the relevant part of the purchase price, i.e. only the portion over £1.5 million would incur the top rate of 12%.
How much could the move save?
It’s possible that switching stamp duty to apply to sellers and not buyers would benefit those looking to move into larger homes worth more money, as well as positively affecting first-time buyers. Clearly the idea is bound to get some attention, and many experts in the industry are already looking into it in more detail.
Whether or not the Government decides to do anything with it remains to be seen. But in a market where first-time buyers in particular are still finding it hard to buy, this could be another perk that makes it easier for them to do just that in the near future.