People have been calling for Stamp Duty Land Tax reform for years so it was a bit of a shock when the Chancellor last week decided to take the plunge and abolish the existing slab structure.
I welcome the move because the previous rules were outdated and had fundamental flaws. It was unfair at all levels - on both buyer and seller. Sellers with properties on the market for just over the cusp of the bands were forced to reduce their price to below the thresholds. This meant they were being penalised by not receiving a price worthy of their property.
Osborne has clearly gone out with this legislation as a vote winner ahead of the election - the majority 98% of homeowners will benefit and he has an opportunity to validate his 'bashing of the rich' when he needs to appeal to the electorate as the election campaign unfolds.
However, those purchasing a property worth £937,000 and above are likely to be penalised, and from this week will be paying more than they would have done last week in tax. And whilst the Conservative party has been anti the proposed 'Mansion Tax' that the Liberal Democrats and Labour parties have been threatening to introduce should they win the General Election next year, this in fact, is a 'back-door' mansion tax - although rather than introducing an annual levy, it will come into force during a property purchase. Whilst I am confident that these reforms will put a stop to this ludicrous 'Mansion Tax', we do risk putting off people who want to purchase homes in prime central London from doing so, which could then bring this area of the market to a standstill.
Whilst many people's reaction will be 'so what?' that there won't be a busy property market at upper levels, it has the potential to negatively impact the whole market and in the long run, the economy. In the UK, a property worth £1million is a mansion, yet many people in London and the South East looking for a home that is worth around this figure will be families who are by no means rich. They live in London for work - unfortunately the UK has become entirely reliant on London as a financial hub - and want to buy a home to bring up a family. However, they may well be deterred from doing so due to the high tax incurred - buyers looking for a £1.5m family home, even in Zone 2 or 3 will have to stump up over £93,000 in advance.
Mansion Tax was a disaster and I do think a new, fairer system of SDLT like this is an improvement but 'taxing the (perceived) rich' so disproportionately may well be detrimental to the economy as a whole. Whilst the lower end of the property market may remain active, the upper end will shut off, and this is likely to trickle down. Even if the buyers are the 'super rich', these wealthy individuals are the ones likely to be contributing more in income tax and spending their money in London and keeping the economy invigorated, so alienating them is a risky move.Suggest a correction