The Autumn Statement finally brought much needed change to stamp duty after years of the CML and other organisations calling for it. But the swiftness of the move was a shock. To have a new system in place immediately, rather than a drawn-out consultation process, is jaw-dropping but still welcome.
The old slab system was market-distorting and becoming more so as house price increases made a growing proportion liable for higher bands. This fiscal drag meant the duty totalled £1bn in July – the highest level on housing transactions since mid-2007, despite far fewer transactions taking place.
In the past year the Government has tried to increase demand through Help to Buy schemes but, in equal measure, the stamp duty system was stifling mobility. Our data shows, among mortgaged transactions over the past year, 21.6 per cent were for less than £125,000, 47.9 per cent for £125,001-£250,000, 29 per cent for £250,001-£925,000, 1.1 per cent for £925,001-£1.5m and 0.4 per cent for over £1.5m. The proportion of transactions that would pay more tax under the new system, if these figures stayed the same, appears as little as 1.5 per cent.
The UK now has a far more progressive tax that is more in line with individual house prices and closer to the marginal system we have long advocated. There will be losers and winners in this but most mortgaged transactions will benefit from lower tax as a result of this move.
Reform of stamp duty was long overdue. Now we must wait and see how the market reacts.