Eddie Goldsmith shares ‘profound concerns’ over property tax in open letter

To His Majesty’s Government

There is currently much speculation ahead of the Chancellor’s autumn statement over plans that the Government may have to change the tax regime within the residential property market and the possible introduction of a national property tax.

As a solicitor and conveyancing professional of over 40 years standing, I am writing to express my profound concerns regarding the introduction of a new National Property Tax and its potential impact on the United Kingdom property market. Whilst I understand the government’s need to explore new avenues for revenue generation, I firmly believe that such a tax, in isolation, would not only de-stabilise the property market but also likely lead to a significant reduction in tax receipts for the government.

The UK property market is a complex and sensitive ecosystem, heavily reliant on consumer confidence and a steady flow of transactions. The introduction of a broad-based National Property Tax, especially at a time of economic uncertainty, would act as a significant disincentive for both buyers and sellers.

There are currently four main taxes that affect the residential home buying and selling market: Stamp Duty Land Tax (SDLT), Council Tax, Inheritance Tax and Capital Gains Tax

Taking these in turn, there are undoubtedly opportunities for reform or removal with SDLT representing a significant barrier to property purchases as it adds significantly to a buyer’s costs on purchase.

Whilst generating in excess of £14 billion per annum, there is considerable evidence from previous short term “holidays” that the “tax take” actually increases when the tax is mitigated as the volume of transactions increase and this, in addition, generates other tax income from ancillary and associated activity.

A review of SDLT is long overdue with various options having been forward such as:

• Allowing the cost to be spread over a number of years rather than being payable on completion.
• Discounts to those downsizing, possibly by way of the tax applying to the differential between sale and purchase price would be likely to generate more activity from “empty nesters” and help free up larger family orientated homes for younger family buyers.
• Charging SDLT to sellers rather than buyers is another option. The majority of sellers have equity within their properties and, whilst paying on disposal, would save on acquisition. Again, a move likely to facilitate greater numbers of transactions.

Politically as well as fiscally, Council Tax is an interesting one controlling taxation from the national centre rather than locally elected councils has both its champions and its detractors.

It is however a significant annual cost to home owners and should, in my opinion, be looked at as part of a holistic approach to property taxation.

Inheritance Tax has already been changed since the arrival of the Labour Government with pension pots being include within the assets of an individual’s estate and reductions to family farm arrangements for farmers grabbing the headlines.

Capital Gains Tax (CGT) is currently only payable upon the disposal of assets beyond an individual’s main private residence (Private Residence Relief). There are now rumours circulating that the Government  is considering bringing a person’s main residence into the calculation for CGT and that a significant sum of money would then become payable on disposal.

Whilst meeting the more extreme elements of an agenda to tax assets and redistribute wealth, it would be hugely damaging to the residential property market and be costly and difficult to implement with valuation criteria needing to be ascertained. Perhaps the biggest issue would simply be that people would choose not to sell at all.

Which brings me to the National Property Tax. I foresee the following immediate consequences:

• Buyer hesitation: Prospective buyers would likely delay their purchasing decisions to assess the full implications of the new tax. This uncertainty would lead to a significant slowdown in demand, resulting in fewer transactions across all segments of the market.
• Seller reluctance: Current homeowners, particularly those contemplating a move, would be hesitant to list their properties, fearing that the additional tax burden would reduce their net proceeds. This reduction in supply would further stifle market activity.
• Reduced transaction volume: The combined effect of buyer hesitation and seller reluctance would be a drastic reduction in property transaction volumes. This is critical, as I have already indicated, a substantial portion of government tax receipts from the property market comes from Stamp Duty Land Tax (SDLT), Capital Gains Tax on property sales, and inheritance tax.
• Impact on related industries: A downturn in the property market would have a ripple effect on numerous related industries, including estate agencies, mortgage lenders, conveyancers removal companies, construction firms, and home improvement businesses, potentially leading to job losses and reduced economic activity.
• Negative economic sentiment: The property market is often seen as a barometer of the nation’s economic health. A de-stabilised market, particularly one impacted by new taxation, could erode overall economic confidence, discouraging investment and hindering recovery.

While a National Property Tax might appear to offer a new stream of revenue, the resulting slowdown in transactions and the potential for a property market downturn would likely offset any anticipated gains from the new tax itself. The existing revenue streams, which are intrinsically linked to a fluid and active market, would suffer significantly.

I urge the Government to thoroughly consider these potential adverse effects and, in particular, introducing any new taxation without setting this against a review and changes across the range of property taxation already in place. I believe that alternative, less disruptive fiscal measures should be explored to meet revenue objectives, ensuring the continued stability and growth of the UK property market.

Both myself and my colleagues at You Convey and across the industry are ready to engage in constructive dialogue and offer our insights to help navigate this complex issue without compromising the vitality of a sector crucial to the nation’s economic well-being.

Yours faithfully

Eddie Goldsmith
Founder and CEO, You Convey