Stamp Duty could be axed in radical shake up

The report by the Institute for Fiscal Studies, which it describes as the most far-reaching analysis of the UK tax system in more than 30 years, also recommends integrating income tax and National Insurance payments.

Targets for change include Inheritance Tax where the individual would be taxed and not the estate on a person’s death.

The IFS believes there is also a case for taxing gifts of cash over the recipient’s lifetime. But it says that exempting estates from capital gains tax should definitely stop.

The report describes housing taxation as “a mess” and recommends that instead of stamp duty, residents of larger houses would pay more council tax so that bills reflected real property values.

Review chairman Sir James Mirrlees, the Nobel Prize economist who gave his name to the five-year report, said: “The system imposes unnecessary costs on the economy.

“It reduces employment and earnings more than it needs to. It discourages saving and investment and distorts the form they take.

“It favours corporate debt over equity finance. It fails to deal effectively with either greenhouse gas emissions or road congestion.” The IFS believes the Government could raise just as much money and distribute wealth around the population in about the same proportions as now but in much cheaper ways, by moving to the simpler system it recommends.

Taxes raise £500billion a year, taking about £4 in every £10 earned in the UK.

Housing taxation is one area the IFS says is crying out for reform.

Stamp duty is levied on the whole value of a property.

It varies from one per cent on houses sold between £125,000 and £250,000 (except for first time buyers who pay nothing), three per cent on homes worth over £250,000, four per cent over £500,000 and five per cent over £1million.

The IFS said it was among the most “inefficient and damaging” of all taxes.

Scrapping the tax would remove a disincentive to moving home, which keeps some people in bigger properties than they need and would help free up the housing market.

Council tax, currently based on 1991 values and capped, would be reformed into a “housing services tax” levied as a proportion of actual value with no cap and no discount for unoccupied or single-person homes.

As always thanks for your attention.

Mark mark@themortgagemonkey.co.uk