CML urges Chancellor to reform Stamp Duty

The Council of Mortgage Lenders has written to the Chancellor urging him to scrap the current Stamp Duty system in favour of a graduated structure.

The CML argues that the current “slab” system of stamp duty (which has seen stamp duty revenue increase by 590% since 1993/94) should be replaced.

The CML has decided to undertake research on the distortive impact of the current system on the housing market and how this could be addressed, and will present the findings to the Treasury early in the new year.

The CML also urges the Chancellor to –

• Substantially increase funding for low-cost home-ownership, particularly shared ownership, to address the shortage of affordable homes in London, the South East and other pressured areas. The CML points out that lenders are very willing to participate creatively to support this aim.

• Recognise the central importance of getting the National Land Information Service fully operational, and ensure funding to achieve this result.

• Uprate the inheritance tax (IHT) allowance and the threshold for income support for mortgage interest (ISMI), in line with current house prices. Using the lowest house price index as at September 2002, this would imply an IHT allowance of £355,700 (currently £200,000), and an ISMI threshold of £165,400 (currently £100,000).

Peter Williams, CML Deputy Director General, says: “The changes we propose would help the housing market to operate more effectively, more fairly and with less distortion.

“The current system of stamp duty, in particular, is unhelpful. It reduces labour mobility and creates artificial “price bunching” just beneath each threshold. We are undertaking further research on this, and we hope this will encourage the Treasury to begin a dialogue about reforming the threshold system.”