A complete overhaul of property tax in the UK is required to rebalance the housing market. According to the Royal Institution of Chartered Surveyors (RICS), abolishing Stamp Duty Land Tax (SDLT) on certain properties would be a start.
In its latest Residential Market Survey, almost half of the property professionals that responded, including estate agents and building surveyors, wanted the introduction of tax incentives to encourage older homeowners to downsize. Surveyor Local works exclusively with chartered surveyors who are members of RICS to offer comprehensive property surveys across England and Wales.
Changes can help younger buyers
More older homeowners in properties that are now too big are struggling to sell and find a smaller home that’s more suitable, in turn preventing families move up the housing ladder into bigger properties.
A fifth of respondents also wanted changes to Stamp Duty Land Tax and council tax to help more young people buy a home.
In a discussion paper, RICS suggested those looking to sell a larger property could incentivised by exempting that property from stamp duty, currently levied on a sliding scale on all property valued at £125,000 or above. First-time buyers don’t pay stamp duty on the first £300,000 of any property transaction in England. Similar exemptions for first-time buyers apply in Wales and Scotland.
According to RICS, this “would bring more second-hand properties to market, benefiting the entire housing chain and addressing the UK’s wider housing shortage”.
Abolish stamp duty to free up funds
RICS also suggests that abolishing stamp duty altogether would free up funds for those looking to buy a home.
Abdul Choudhury, RICS Policy Manager said: “It is not surprising that our professionals feel that residential property taxation is out of kilter. If we consider tax in terms of how they disincentivise certain behaviours, SDLT makes purchasing, moving and making more effective use of stock costly at a time when we need all these things.
“Council taxes, on the other hand, are woefully out of date and are highly politicised.
“Any changes to the system of tax should be considered carefully, as they would have disruptive consequences that could negatively impact activity.
“Providing an SDLT exemption for downsizers could free up larger, underused properties but will likely provide them with a market advantage over other participants. Similarly, replacing SDLT with council tax could increase house buying and selling activity but increase day-to-day living costs at a time when occupiers are already facing higher bills.
“However, given the state of the housing market, it would be prudent for the government to consider the cumulative impact current taxes are having on behaviour and determine what changes can create a more sustainable and vibrant property sector.