Of all the iniquitous taxes we have to pay in Britain, I do think that stamp duty on the purchase of houses is the very worst. First, it is not charged marginally as income tax is: instead, when you jump bands you will suddenly find that the entire amount is charged at the next rate up: buy a house for £249,000 and you’ll pay £2,490 in tax (the rate is 1% up to £250,000), buy one for £251,000 and you’ll pay £7,530 (above £250,000 it’s 3%).
Worse, you’ll be using money you already paid tax on to pay your stamp duty (don’t forget that if you’re a 40% tax-payer it will have cost you a good £12,500 to get the £7,530 you now have to hand over for your £251,000 house). At least with the majority of taxes there is the comfort of knowing you’re being taxed on some kind of gain – a new income or a capital gain of some kind. Stamp duty, on the other hand, is just another grab from the same pile and as such is particularly irritating.
Finally, stamp duty has the effect of making a flat housing market feel like a falling market. If you buy a house for £300,000 with the customary 10% deposit of £30,000, you’ve already lost the equivalent of 30% of your capital in tax (£9,000). If prices don’t rise – even if they just stay flat for ever – you will never be able to sell up and move on without having lost money on the deal. The Chancellor’s vote-grabbing announcement in his particularly boring Budget that the minimum threshold for stamp duty is to be raised from £60,000 to £120,000 in order to encourage first-time buyers (at precisely the wrong time…) does nothing to change any of this.
Most of Brown’s other offerings this time around are equally pointless. Raising the inheritance tax nil-rate band from £260,00 to £275,000 is a tiny gesture that does nothing to change the fact that IHT was designed as a rich man’s tax, but has effectively become a tax on homeowners, and we all know what will happen to the extra £23bn he says he intends to spend on health (think lots more unproductive pen pushers). One thing I feel I should be pleased about is that Isa allowances are going to continue to exist until 2010. And I am. But I’m also irritated that we can’t take it for granted that this kind of savings vehicle, once in place, will stay in place. Making financial plans for the future is boring and difficult enough already without having to worry that the building blocks of our savings are going to be removed whenever Gordon Brown feels like it. No wonder most people can’t be bothered