Scrapping stamp duty could release capital trapped in property and encourage more homeowners to move according to Glentree International Managing Director Trevor Abrahmsohn.
His comments follow Conservative leader Kemi Badenoch’s pledge to abolish stamp duty on primary homes and remove inheritance tax from family homes if the party returns to government.
Badenoch told the Conservative Party Conference that family homes passed to children or grandchildren would be exempt from inheritance tax, regardless of their value.
The Conservatives also plan to increase the standard inheritance tax nil-rate band from £325,000 to £500,000 per person, allowing couples to pass on an additional £1m tax-free alongside the family home.
STAMP DUTY
Abrahmsohn says reducing the burden of stamp duty would help improve the functioning of the housing market.
He says: “Taking a knife to stamp duty would be very welcome, as the draconian levels of this tax were foolishly introduced by the former Chancellor Osborne in 2014, and this has held back the markets ever since.
“It traps capital in property, which would otherwise find its way into the economy by way of retail spending and the like.”
Independent analysis has previously identified stamp duty as a barrier to housing mobility.
The Institute for Fiscal Studies argues that taxing property transactions discourages people from moving and can prevent households from upsizing, downsizing or relocating for employment.
Current stamp duty rates in England and Northern Ireland start above £125,000 for most home movers and rise to 12% on the portion of a property’s value above £1.5m. First-time buyers pay no tax on the first £300,000 when purchasing a property costing £500,000 or less.
INHERITANCE TAX
Under existing rules, inheritance tax has a £325,000 nil-rate band alongside a £175,000 residence nil-rate band when a qualifying home is left to direct descendants.
Allowances can be transferred between spouses and civil partners, potentially allowing a couple to leave £1m free of inheritance tax under current rules, although the residence allowance starts to taper on estates worth more than £2m.
Badenoch’s proposal would instead take the qualifying family home outside inheritance tax and allow couples an additional £1m tax-free.
Abrahmsohn says: “No inheritance tax on the family home must be a good thing, as this is a spiteful and pernicious double-taxation penalty which deters wealth creation at the medium to top end of the spectrum.”
He welcomed the direction of the Conservative proposals but said the measures would need to be properly costed.
