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RICS: Radical SD overhaul needed

Jaimie Kanwar

The RICS has challenged the Government to take proactive action to boost the ‘faltering' housing market.

Proposing a system that would benefit 99 percent of home buyers, RICS called on the Government to find a way of implementing the policy, which will provide a boost to the economy and the faltering housing market.

RICS proposes the abolition of the existing slab tax system*, replacing it with a two tier marginal tax system. 

The RICS proposal for Stamp duty land tax is as follows:

 - Slab tax system reformed to a two tier marginal tax system that reduces barriers to vast majority of homebuyers moving onto or through the market

- No-one pays SDLT on first £150,000 of home purchase

- 2.5 percent marginal rate on the value of homes between £150,000 and £250,000

- 5 percent marginal rate on the value of homes over £250,000

- The thresholds for stamp duty rates should then be annually indexed, reflecting house price growth and inflation

- Everyone purchasing a home up to £1million would pay less stamp duty

- Purchasers of the most expensive homes would pay more stamp duty. However, the increases are relatively minimal - the SDLT bill on a £1.5m home would only be 8% higher in total (£5,000 extra).

- Government would initially lose up to 24 percent of revenue.

With transaction levels plummeting, first time buyers have been hardest hit seeing their home ownership dreams evaporate.

With long-term house price rises outstripping wage inflation, food and fuel bills rising, and tighter lending criteria being applied by mortgage companies, the residential property market is becoming more inaccessible.

Treasury must take action

RICS Director of External Affairs, Gillian Charlesworth said: "After having mortgages pulled from beneath their feet from lenders facing the full brunt of the credit crunch, consumers are looking to the Government for help.

"HM Treasury needs to find a way to implement this policy or, if they can't do this imminently, to introduce a stamp duty holiday that will get the market moving."

Initially the RICS proposal will reduce Government revenue by up to 24 percent, but given the 40 percent rise in stamp duty revenue in recent years (up from £4.6 billion in 2005/06 to £6.45 billion in 2006/07) there is room for the Government to manoeuvre.