The household charge and stamp duty

[Brendan Burgess]

One of the reasons we had no rates/household charges was because we had very high stamp duty - up to 9% of the value of the property at one stage.

I think it's much better to have lower stamp duty and an annual household charge.

But how do you make it fair for those people who have paid huge stamp duty in recent years?


Give them an exemption for ten years?
Give them a credit against future household charges?

And given that the high stamp duty coincided with very high property prices, they have also faced huge falls in the value of their home.

OK, most people who paid high stamp duty, probably are on a very cheap tracker, so they can afford to pay a high household charge.

And people who bought at the peak have got additional mortgage interest relief.

How far back do you go? Back to 2004? Back to 2000?

It's a tough one.

 

[thedaras]

How about going back on a scale basis,from the year 2000?
Ie; Those who paid say 25k of interest get so many years free and those who paid 50 get more etc.
I paid an absolute fortune in stamp duty and I bought in 2002 and paid a fortune in stamp duty,and Ive paid my household charge..
I would imagine anything like this would be so difficult to run that we will end up paying a flat rate,regardless..
But the situation now is that someone could buy a house like mine in the same area,pay a lot less for it and pay hardly any stamp duty,and could also be one of those who are choosing not to pay the household charge.
So my feeling is while it is most likely to be unworkable,a sliding scale would be fair?

 

[SarahMc]

Linking the charge to stamp duty would make it very difficult to raise stamp duty in the future.

Certainly there are people who paid high stamp duty and are struggling now, equally, there are those who paid it who are doing fine thank you. A universal credit or exemption would be very unfair IMO.

 

[Brendan Burgess]

How about going back on a scale basis,from the year 2000?
...
So my feeling is while it is most likely to be unworkable,a sliding scale would be fair?

I don't think that any system would fair for everyone. But you could remove some of the unfairness

How would a scale basis work? Something like the following?

Credit available ( a bit like CGT losses forward)

year of purchase|% credit
2004 -2005| 20%
2006 -2008|40%
later|50%

The credit lasts for [10] years

Example

year of purchase|2004
Stamp duty paid|€50k
Credit|€10k
Last year to use it| 2014

This person would be exempt in 2012,2013 and 2014 but would pay it in full thereafter

Linking the charge to stamp duty would make it very difficult to raise stamp duty in the future.

.

Not sure why this would be? But I don't think that they will be raising stamp duty for a long time to come. An annual household charge would make much more sense.

 

[Joe_90]

Stamp duty is not my area of expertise but in the main first time buyers are exempt from SD with the exemption on new properties and exemptions up to a level on second hands.

There may be FTB that bought expensive houses as their first house who need some relief.

But look at the second time buyers, by definition they had a previous home which they were trading up from having made a gain on that property.

Say they had made a gain of 50k, and buy a house for 300k SD 15k so they have 35k after tax. A first time buyer paying 30% income tax, PRSI & levies/ USC would pay 15k in tax to have the 35k after tax.

Would relief be due to the person who paid the SD and not other person when they a both in the same after tax position?

 

[Brendan Burgess]

Hi Joe

A very interesting point. Trader uppers got tax-free capital gains on the sale of their previous home so they should not be given any further tax relief.

Stamp duty for first time buyers of second hand houses was scrapped in Dec 2006, I think.

So how about the following rule:

First time buyers will get a credit of X for any stamp duty they paid since Jan 2003.

 

[Joe_90]

[broken link removed]

 

[losttheplot]

As someone pointed out on another thread sometime back (can't remember where), if there was lower stamp duty during the boom, the house price would have been higher. The house price reflected the maximum amount the borrower could get, with stamp duty factored in.

Same as some Section 23 properties. I had one estate agent tell me the next phase of a development was 10k less than the previous as it didn't have S23 relief, they just sold S23 for a higher price.

 

[kkelliher]

I was a first time buyer in 2002 (and I still paid a heafty price for the property). I wanted to stay in my locality and therefore I had to purchase a second hand property as there were no new estates in the area. I paid over €32k in stamp duty at the time. No first times buyers grant available. The following year they abolished stamp duty for first time buyers on all properties and stamp duty has been falling ever since.

I therefore dont believe it is fair to only start any possible rebate in the mid "noughties" as it would clearly not be fair to all.

 

[Joe_90]

I think that you are in the group that needs to be catered for.

Having said that you paid in excess of 400k for your house in 2002. All second hand houses at that price attracted stamp duty. So now there is a discussion to be had about the impact that stamp duty has on the price of houses.

Would a similar new house have been priced at 450k giving that it would have no/ a lower level of stamp duty, on the basis that the price is based on the capacity of the market to pay. The point being if someone has a budget of 300k to spend they either buy a new house for 300k or a second hand house that costs 300k including the stamp duty. Both being in the same boat at the end of the day.