Stamp Duty Land Tax Bill

Jonathan Edwards Excerpts

Monday 12th January 2015 Commons Chamber

[The Financial Secretary to the Treasury (Mr David Gauke)]

It is a great pleasure to serve under your Chairmanship, Mrs Riordan, and to debate the Bill.

Clause 1 amends section 55 of the Finance Act 2003 to change the basis of calculation for stamp duty land tax on residential property transactions, and provide a new table of rates and thresholds that apply to those transactions. It also introduces the schedule that makes the consequential changes to SDLT, and to the method of calculating the amount of tax due when certain reliefs are claimed. As right hon. and hon. Members will be aware, the measure came into force through a resolution under the Provisional Collection of Taxes Act 1968 for transactions whose effective date—usually the date on which the purchase contract is completed—is on or after 4 December 2014.

Let me briefly remind the House why we have introduced this important and comprehensive reform to SDLT on residential property. In essence, the stamp duty system on residential property as it previously stood was flawed and widely criticised, and it created an enormous hike in taxes at certain thresholds. Someone paying £250,000 for a house would pay £2,500 in stamp duty, but if they paid £250,001, they would pay £7,500—three times as much. Inevitably that created peaks in transactions at those thresholds and dead zones above them, and that big distortion affected a significant number of properties. We have got rid of the inefficient and distorted old system and replaced it with a fairer new system that cuts SDLT for 98% of those who pay it. No buyer of a property under £937,500 will pay more SDLT than they would have done before 4 December. We have provided a calculator on the HMRC website so that people can work out how much tax they will pay, and I am happy to confirm that to date it has been used more than 1.25 million times.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

As the Minister points out, this change will result in savings for the vast majority of people purchasing a home. What assessment has he made of the impact on house price inflation as a result of the changes?

[Mr Gauke]

There may be a slight impact on house prices, but we must put that in context. Many factors determine house prices, and on the evidence before us our view is that the changes will not have a significant impact on the overall level of house prices. They are likely to have a bigger impact on removing some of those dead zones and distortions in the housing market, which is beneficial in creating a more efficient and effective housing market.

The reform has been welcomed by right hon. and hon. Members in all parts of the House and by outside bodies, including the Council of Mortgage Lenders, the Institute of Directors and the Institute for Fiscal Studies. Jonathan Isaby, from the TaxPayers Alliance, called it:

“an early Christmas present for young people looking to get on the housing ladder.”