The Spring budget needs to consider stamp duty and address the tax placed on additional dwellings according to a number of property experts.
The Spring budget is still just around the corner despite the recent resignation of Sajid Javid as Chancellor and the appointment of his successor, Rishi Sunak.
The new Chancellor confirmed that the budget will proceed on 11 March as planned with the housing sector immediately speculating on potential changes which could stimulate the housing sector.
Prior to Boris Johnson’s ascension to the role of Prime Minister, he discussed the innate benefits of amendments to the current Stamp Duty Land Tax system.
His team proposed raising the current threshold from £125,000 on all current property owners or a £300,000 threshold for first-time buyers (FTBs) to a standard threshold of £500,000.
However, since that team the cabinet have failed to publicly place this relief back onto the table.
Geoff Hall, Head of Residential Conveyancing at Gordon Brown Law Firm LLP and director of the national body, the Conveyancing Association, said:
“It is a nice thought for many and would probably stimulate the market, however, I fail to see how the Exchequer could afford such a bold move given that in the year to April 5 2019, Stamp Duty revenue was down 7 per cent on the previous period and was still an incredible £11.9 billion.
“The average UK house price in November 2019 was £235,298. A move of this nature would potentially remove all but the highest valued properties from paying Stamp Duty.
“The only way, in my opinion, that such a move would be viable, given that Stamp Duty is worth roughly 2 per cent of the Treasury’s revenue, would be if revenue was raised via other means which could go against manifesto promises made by the Government.
“In the run-up to Boris being elected Prime Minister, he spoke a lot about Stamp Duty cuts for UK residents, yet this seems to have gone quiet.”
Earlier this week, a number of organisations representing landlords also used the news of the impending Spring Budget to highlight how tax changes could impact the housing market and further choke the rental sector.
The Residential Landlords Association (RLA) and National Landlords Association (NLA) are pleading with the government to consider relinquishing the perceived tax burdens on landlords or risk up to half a million homes leaving the supply of rented housing.
The organisations have argued that the 3 per cent stamp duty levy on additional housing has already hampered and disrupted buy-to-let investment.
Furthermore, the decision to reduce mortgage interest relief to basic tax rates for long term property lets in April is further exacerbating the problem as more landlords look to offer short term lets.
Geoff Hall further added:
“The pledged three per cent surcharge on non-resident buyers depends entirely upon the Chancellor’s motivation to tax foreign nationals. This could be a gamble in terms of the market as in some areas of the country foreign investment makes up a fairly large part of the market.
“Just over two years ago the value of the pound reduced making it more attractive for foreign nationals to invest in the UK property market. To tax these investors could reduce the amount of investment from them, and where investment is still being looked at, an investor may look to reduce their offer to purchase a property to offset the increased taxation; this would potentially cause downward pressure on house prices in some areas.
“That said this may be part of the motivation, as reduced prices could make the market more attractive and accessible to UK residents. This could result in additional revenue to the Exchequer from foreign nationals who do decide to buy, which could also give the Chancellor some opportunity to make concessions elsewhere.”
What changes should the Chancellor consider making to help the housing market?
