Sunday, 31 December 2017

HOW MUCH WILL I PAY? THE COST OF THE MINI-LVT TO HOME-OWNERS

So the bargain is this: Next time you buy a house, you won’t pay Stamp Duty. Instead there will be a much smaller annual charge based on the value of the plot. 

A rate of one-third of one percent (0.3%) of the Land Value would do the trick. This would keep the same amount of tax revenue for the Chancellor, eventually, after a few years.  

Well, not quite, but this is a dynamic tax geared to rising land prices. And don’t forget the good part of this switch—getting rid of Stamp Duty on house purchases, probably the worst tax there is, certainly one of the most hated.

But what about its replacement? Here’s what mini-LVT looks like for average-priced houses in different parts of England:

Area
Average £price of house
Implied LV
Proposed annual LVT at 0.3%
Old £SDLT (1-off)
Cluster*
150,000
30,000
£90
500
East Anglia
220,000
100,000
£300
1,900
South West
230,000
110,000
£330
2,300
South East
350,000
230,000
£690
7,500
London
500,000
380,000
£1,140
15,000





*‘cluster’ means everywhere outside London and the Home Counties

These are what you would pay for a typical, average house. Actual prices can be much higher. 
Oftentimes when prices are lower than the average, there is NO Stamp Duty to pay. Now I’m asking them to pay a little bit. They won’t be happy!
At the other end of the scale, the Londoners will be delighted! Their stonking great Stamp Duty bill will be replaced by something far smaller, away into the future. 
Just look at the figures.
This is Bad Politics, but we may be able to get away with it. Stamp Duty will be abolished altogether at a stroke. 
There won’t be another rate to compare it with, only the current existing mini-LVT. 
Will those outside London forget that they lost out? 
Will the London/South Easterners show their gratitude for their comparative good fortune?  
Don’t bank on it!
Wouldn’t it be cheaper and better to exempt those with the cheapest plots from mini-LVT? 
Or, as suggested by Tony Vickers, give each household a fixed (£) amount of discount? 
From my numbers above, that could be giving each house a £100 ‘voucher’ to reduce their mini-LVT, in many cases to zero.

In my next posting, I’ll look at these messy ideas, and come up with something better!

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