The hated stamp duty land tax is such a badly designed, universally reviled tax that it’s amazing no politician has got round to reforming it before.
Chancellor George Osborne has finally sorted out the mess, and is so proud of himself, he made it the final flourish in today’s Autumn Statement.
It makes you wonder why he didn’t get round to it before.
Osborne claims that 98% of homebuyers will benefit from the overhaul, and hopes they will thank him come the general election next May.
But that’s not his only political goal: he is keen to twist the knife into Ed Miliband’s proposed new mansion tax as well.
Good Politics, Bad Practice
Miliband may still press ahead with his plans, on the assumption that there is still plenty of mileage in bashing the rich.
Which there no doubt is.
But even if you think bashing the rich is a good thing, the mansion tax is a bad way to do it. A more sensible method would be to reform the antiquated council tax system, which lets rich property owners off lightly.
Klass Warfare
The proposed tax will be charged on properties worth more than £2 million. But properties around this threshold will have to be valued, regularly, by an army of surveyors.
There’s plenty of scope for owners to fiddle the system, say, by dividing expensive homes into flats.
Grannies who have lived in family houses for years will suddenly have to pay a hefty tax bill from what may be minimal income. You don’t have to be Myleene Klass to work that out.
In fact, the mansion tax is so muddled, it made stamp duty look almost sensible.
Bands On The Run
From midnight, stamp duty will make a lot more sense.
Osborne is finally scrapping the “slab” nature of the tax, which meant that somebody buying a property for £250,000 would pay £2,500, but the bill would triple to £7,500 if the home cost just £1 more.
This distorted behaviour around each price band. The tax will now only be charged on the proportion of the property that falls over each band, rather than the total sale price.
Stamp It Out
The new starter stamp duty rate of 2% will kick in at £125,000, but only for the portion of the property’s sale price that falls over that threshold.
Buyers will pay 2% on the portion up to £250,000, then 5% up to £925,000, 10% up to £1.5 million, and 12% on everything above that.
Osborne assures us that only those buying houses more than £937,000 will pay more than they did before, so he can also claim to be soaking the rich.
But the wealthy won’t be complaining quite so loudly, because unlike the mansion tax, they only pay stamp duty once, rather than every year.
And they’ll be cheering if Osborne’s political manoeuvring does achieve its ulterior aim of putting the mansion tax to the sword.
