There is an increasing call for stamp duty in the UK to be changed but a new analysis of figures shows why the Government might not be keen to do so.
For the same number of property transactions as two years ago, the Government has taken in an extra £2 billion in stamp duty land tax, according to an analysis from accountants Blick Rothernberg.
And it reveals that, while some of the increase could be due to higher property prices, most of it is due to the 3% surcharge added to additional homes, in particular properties being bought by landlords.
The latest statistics released by HMRC to the end of July 2017 show that the number of property transactions at 1,204,730 bringing in £12.4 billion in stamp duty is now broadly the same as the year to the end of July 2015 when it was 1,205,700 with £10.4 billion, but stamp duty receipts have increased by 20% in the same period, equivalent to an extra £2 billion in tax.
‘Some of this increase could relate to general property price increases, but it is likely that the majority relates to the changes from 01 April 2016, which added an additional 3% stamp duty for purchases of additional residential properties,’ said Robert Pullen, director at Blick Rothenberg.
‘The policy intention was always stated to be to realign the residential property market to make it fairer for first time buyers. It is becoming clearer, however, that as prices continue to rise, the measure has succeeded only in generating extra tax for HMRC, as well as a sluggish property market evidenced by the number of property transactions falling,’ he explained.
‘The Government will need to urgently consider whether the additional 3% stamp duty policy is helping achieve fairness in the property market, or if it is creating more problems than it is solving,’ he added.
Mark Scott, residential property specialist at law firm Blake Morgan, pointed out that overseas property investors are also caught by the additional liability and this is affecting sales.
‘The 3% surplus stamp duty applies to anyone that owns a second property anywhere in the world. I am not so sure that was the original intention and feel this has already deterred a number of overseas investors, which is not great for our economy,’ he said.
‘We hear and read about it affecting buy to let investors, but in real terms, it also affects buyers who own property abroad and simply want to purchase a property in the UK, maybe for their children to live in while they finish their education or simply as a UK base and already own a home in their own country,’ he explained.
‘Personally I feel it would be good for our property market and for investment in the UK if the Government was able to offer an exemption on the surplus duty or at least a reduction in stamp duty land tax for anyone looking to buy property here and living outside our jurisdiction.
‘Hopefully this would encourage much more investment in the UK, especially with Brexit around the corner where we need to be creative and proactive in encouraging investors from worldwide,’ he added.
Estate agents, solicitors and lenders have all called for the tax to be re-thought. While the analysis shows that landlords have contributed the biggest chunk, industry commentators also say that it affects first time buyers, especially in London. Where prices are cheaper a first time buyer can pay no stamp duty but in London this is virtually impossible.
There are also calls for stamp duty to be exempt or older home owners who want to downsize, freeing up homes for those with families moving up the housing ladder. It is argued that such an incentive would encourage more to move to smaller homes.