View more on these topics

IFS: Stamp duty ‘worst designed and most damaging’ tax

Stamp duty is one of the worst designed and most damaging taxes and serves as a drag on the housing market, according to the Institute for Fiscal Studies.

In a speech to the Chartered Tax Adviser annual conference last night, IFS director Paul Johnson said although this Government and the previous Labour administration had made some improvements to the tax system, other changes made taxes “more complicated, less efficient and less transparent”.

He said: “The last government and this one raised stamp duty rates time and time again. This is one of the worst designed and most damaging of all taxes, yet revenues from it are due to hit £15bn within just a few years. At the extreme a £1 increase in sale price can now trigger an additional £40,000 tax bill. The tax helps to gum up the entire property market.”

He also criticised:

  • The effective 60 per cent income tax rate for people earning between £100,000 and £120,000 due to the loss of the personal allowance. “It’s hard to make much sense of that,” he said.
  • The fact that some elements of income tax are no longer adjusted for inflation but are instead set in cash terms, meaning more people are pulled into higher rates.
  • That Governments of all stripes have cut income tax while increasing national insurance contributions because it is “politically easier”.
  • The continued failure to reform the “increasing absurd” council taxation away from using bands based on 1992 prices.
  • The “dramatic” reduction in income tax allowances for pensions contributions brought about by the Coalition’s cut in the annual personal allowance.
  • The “further complexity” that would result from Labour’s proposal to limit pensions tax relief to 20 per cent for those earning above £150,000.                     

He praised the consistency of the coalition’s policies of cutting corporation tax to 20 per cent and raising the income tax personal allowance to £10,500, saying “these two particular policies stand out among the complexity and uncertainty created elsewhere”.

Johnson reserved special criticism for the last Labour government. He attacked the “chaos” around the introduction and abolition of the 10p income tax and capital gains tax bands and the introduction and abolition of a 0 per cent corporation tax band for low-profit firms.

He says: “The last Government could fill its own hall of shame with damaging tax policy.” 

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. I don’t disagree, but can someone please explain why we are all so hot and bothered about the proposed transaction tax. After all that’s exactly what Stamp Duty is – only at a much higher level.

    Is our government being hypocritical as usual?

  2. Andrew Johnson 23rd May 2014 at 11:41 am

    Maybe a bold move would be to implement a 20% Stamp Duty Tax for all property purchases made by foreign investors who do not live in this country. This would increase tax revenues for the wider good or be used to remove Stamp Duty for residential buyers who are FTB or movers who are shackled by the extraordinary levels of moving costs especially over £500K. With some of the world’s wealthiest people from Russia, China, Maylasia etc pushing up property values by buying property in the UK and in particularly London, I do not believe this level of taxation would put them off buying, especially as the UK is one of the safest and best places to buy property and live. We could then use this to better the lives of people in the UK.

Leave a comment

Close

Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm

Email: customerservices@moneymarketing.com