Habito comments on the likelihood of Government announcing stamp duty changes
Martijn van der Heijden, Chief Strategy Officer at Habito, comments on the likelihood of Government announcing stamp duty changes in the budget.
Habito thinks there is a good chance the Government will announce changes to stamp duty at the budget, based on an obscure statement answered in the House of Lords recently.
This seems to confirm changes being announced on March 11:
“The Government has already made substantial reforms to the taxation of housing…The Government will announce further updates on all tax measures at the Budget, to be held on 11 March.” Read more here.
Habito believes this is the first time a Government spokesperson has said they are going to announce changes, as opposed to saying they ‘are looking’ at it.
Martijn van der Heijden comments:
“The Prime Minister agrees that reform of stamp duty is needed, it’s something he highlighted during his leadership campaign. The challenge is that revenue from stamp duty is quite the money-spinner for government coffers – it brought in almost £12 billion in 2018/19, almost double the amount it raised in 2010/11*.
“The relief for first-time buyers has become outdated and failed to keep up with the market. First-time buyers looking to buy in London only benefit from relief from stamp duty on houses up to £450,000 so are still liable to pay the fee on anything above. Given that as of May 2019, the average house price in London was £457,471 – many would argue it’s not a relief that’s relevant in the capital.**
“The government should not only be reconsidering the thresholds for stamp duty for first time buyers but link them to regional house price growth.
“Liability for first time buyers to pay stamp duty is dictated by two thresholds (one in and one outside of London) but fails to account for regional disparities in the rate of house price growth, impacting areas such as Nuneaton & Bedworth, Stockport and Leicester, which have bucked the national trend and seen double-digit house price growth in the last year, making them less accessible for first time buyers. Linking thresholds for stamp duty to local house price growth would better support those trying to get onto the housing ladder in the place they love.
“For homeowners, the liability to pay stamp duty despite poor performances in house price growth in some areas of the UK, also means that the tax may be blocking those looking to move. Under proposed changes that would see a reduction in stamp duty from 5% to 4% for a next time buyer looking to buy a house for £550,000, they would currently pay £17,500 in SDLT. Under the changes, this would drop to £14,500 – so a significant saving, but the duty would remain a large cost.
“If the government wants to encourage more liquidity for those already on the housing ladder, then stamp duty on primary residences, and specifically the 3-month limit that homeowners have to request a refund from HMRC, should be reconsidered and at the very least, extended. We believe these steps would support homebuyers across the UK.”
*Stamp duty land tax: United Kingdom HMRC tax receipts 2000-2019
Kindly shared by Habito