If stamp duty stops a teacher taking up a better job, that’s bad news for all of us

Imagine a 27-year-old English teacher. They work at Ark Acton Academy, which, as the name suggests, is an academy in Acton, west London. They earn £50,474, in line with national pay scales for a teacher of their experience.

They are good at their job, and ambitious. They see an advert for a head of department job at Ernest Bevin Academy in Tooting, south London. It looks like a winner – same base pay as their current job, but with a £12,514 “teaching and learning responsibility payment” on top. TLRs are additional payments made to heads of departments and other teachers who hold significant responsibilities beyond their classroom role.

The additional £12,514 is almost a quarter of their current pay, which is good news. Not just for them, but for all of us. Just as their income rises a quarter, so their contribution to national income will also rise by a quarter. If we could all be promoted like this, our country would be very rich. They will pay more in tax, meaning more money for the NHS, defence and, yes, for education. This, then, is a very attractive job prospect for them and for the country. Unfortunately, Tooting is not around the corner from Acton – the journey is at least an hour and a quarter, depending on time of day, and so on.

Realistically, they will have to move. Their partner is happy with that: they work in the centre of London and can commute from either place.

As young professionals, the couple own a flat in Acton. As is typical for the area, it is worth about £600,000. Thankfully, flats in Tooting sell for very much the same price. In fact, they can sell their two-bedroom 59.7 sq metre garden flat and buy a very similar 59.2 sq metre garden flat for exactly the same price. For sure, there are estate agent’s and legal fees, but it must be worth it for a 25% pay rise, right?

Unfortunately, the UK government has set up the tax system so that the answer is no.

A pay rise of £12,514 gross a year is nowhere near £1,000 a month net. With a higher salary, the couple’s pension contributions will rise by £1,615 a year – in part because they are now in a higher contribution band and have to pay more on their previous salary, as well as losing part of their new salary. That leaves £10,899, on which they will pay £4,360 in income tax, £218 in national insurance and £980 in student loan repayments. That £12,514 becomes £5,431, after the government has taken 57% of it.

Still, £5,431 is not to be sniffed at, so our happy couple decide to go for it.

Until they remember stamp duty, which, on a two-bedroom flat in Tooting, will be £20,000. Taking into account the interest that can be earned on £20,000, the couple will break even only in their fifth year of the new job.

Or, to put it another way, the government will take 100% of their pay rise for the first four years.

You couldn’t make it up, and I didn’t.

Stamp duty prevents people from moving to take better jobs, and that directly and inevitably reduces national income. It’s true that stamp duty largely discourages moves within London and the south-east of England, rather than moves across the country. But that doesn’t mean it isn’t damaging the jobs market and the economy, as our example shows. This is especially true for jobs that are spread out across the capital, such as teaching or medicine, rather than jobs that are concentrated in one place, such as banking.

It is a mad, bad tax, and any government serious about growth would aim to reduce it dramatically, or eliminate it.

Photograph Johnny Greig/Getty Images