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Scotland set to abolish 'slab tax'

Ed Bowsher
by Lovemoney Staff Ed Bowsher on 08 June 2012  |  Comments 21 comments

The Scottish government is consulting on a plan to make stamp duty a fairer tax. Let's hope that the Westminster follows Holyrood's lead and abolishes the 'slab tax.'

Scotland set to abolish 'slab tax'

Stamp duty on property sales is possibly the most stupid tax in the UK. I don’t object to taxing a property sale, but I strongly object to the current ‘slab tax’ structure.

So if a residential property is sold for £249,000, stamp duty is charged at 1% on the whole value of the property. So you’d pay £2,490 in tax.

But if a property is sold for £251,000, stamp duty is charged at 3% on the whole value of the property. So you’d pay £7,530 in tax. This makes no sense at all.

Here are all the thresholds for this crazy tax:

Purchase price

Stamp duty rates

Up to £125,000

Zero

£125,001 to £250,000

1%

£250,001 to £500,000

3%

£500,001 to £1 million

4%

Over £1 million to £2 million

5%

Over £2 million

7%

It would make much more sense to structure stamp duty like income tax.

Say a house was sold for £400,000. Stamp duty could be levied like this:

£0 to £100,000: 0%

£100,001 to £200,000: 2%

£200,000+: 3%

In this example you’d end up paying £8000 in tax.

Scottish consultation

I’ve criticised the ‘slab tax’ before on lovemoney.com, so I’m delighted to see reports that the Scottish government is now consulting on plans to abolish stamp duty north of the border.

If the Scottish government follows through on its plans, stamp duty will be abolished in April 2015 and replaced by a fairer Land and Buildings Transactions Tax. Under the proposals, no tax will be charged on properties worth up to £170,000 and there will be tax cut for all properties sold for up to £325,000.

The Scottish government can make these changes as some extra tax-raising powers were devolved to Scotland this year. I just hope that the Chancellor has noticed this very sensible Scottish move.

End the slab tax now!

More:  Thousands owed inheritance tax rebate

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Comments (21)

  • tuttogallo
    Love rating 75
    tuttogallo said

    RocketSteve: sorry the debt is not down, only the rate at which it is rising. The "Fiscal deficit", that is the annual shortfall of income against expenditure has reduced.

    Our children and our children's children will still have to pay the interest on the interest on the interest on our mountain of debt.

    The present cuts go nothing like far enough to sort out the problem. What is needed is bigger cuts and an increase in taxes, which of course cannot be done because it's a vote loser.

    The finances of democracies, almost without exception, are ruined by these short term vote buying considerations.

    Report on 18 June 2012  |  Love thisLove  0 loves
  • The Bank Manager
    Love rating 72
    The Bank Manager said

    Why there needs to be a variable tax is incomprehensible to me. First of all, for what service is this fee actually being paid?

    I believe that Stamp Duty was historically the registration of the exchange of ownership in the land at Land Registry, so it begs the question that for undertaking that paperwork and registering the new ownership details is pretty similar for a £125,000 transaction, as it would be for a £20,000,000 transaction.

    Placing a higher tax on this action, where the majority of UK property is now registered land and therefore the 'switch' from proprietor 'A' to proprietor 'B' is a simpler task than say 20-30 years ago when one had to go through the mass of deeds and covenants, should mean the costs are maintained at a level that should differ little.

    In addition, in a major town or city where a property is unknowingly priced at a stupid £X million, compared to a property in a rural area at say £200,000, the tax charges the buyer more and yet the parcel of land could be greater with the rural transaction! There is no parity here.

    It should be a flat fee to one and all, to ensure equilibrium. Stamp Duty is another stealth tax and successive Chancellors have done nothing about it because it brings much needed 'free' income into the Exchequer, guaranteed to be received, as it has to be paid at the time of the transaction. Very few can dodge this tax (I do not condone such an action)!

    Report on 24 June 2012  |  Love thisLove  0 loves

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