Significant tax reform is on the horizon but will not involve reversing the liability of stamp duty land tax, according to the Chancellor, Sajid Javid.
An article in Saturday’s The Times speculated that Mr Javid was considering measures to save first-time buyers (FTB) from paying stamp duty land tax (SDLT) by placing the emphasis on sellers.
Following the article, experts had expressed their consternation and concern by highlighting that SDLT bungs up the property market and stifles growth, insisting a reversal of the current system would not unlock the housing market but could hinder it further as sellers of more expensive properties would be reluctant to enter the market whilst they were responsible for such a tax burden.
However, Sajid Javid has rejected the outcome of the article and insisted that ‘bold measures’ were needed to help unbung the property market.
He also suggested that a reversal of the current system which would place the emphasis on sellers as opposed to buyers would not be ‘supported’ and is therefore not the ‘bold measure’ the Government are looking to incorporate.
The announcement will be a surprise for the Association of Accounting Technicians (AAT) who proposed the idea at the start of July by highlighting the relief is expensive to the taxpayer and potentially detrimental to the housing market as it may lead to increasing house prices.
AAT suggested an alternative system of switching the SDLT obligations from the buyer to the seller. They claimed that this would be a fairer system as those moving up the ladder would be paying money on the lower priced property, meaning that all buyers would save with the exemption of those choosing to downsize.
This announcement could suggest that the Government are more committed to fulfilling the ‘bold’ SDLT reforms made by Boris Johnson before he became Prime Minister.
Boris Johnson told the group of Tory voters that the budget would overhaul the current stamp duty land tax (SDLT) thresholds by scrapping SDLT on properties worth less than £500,000.
Currently, only properties priced under £125,000 on all current property or a £300,000 threshold for first-time buyers (FTBs) are immune from SDLT. This would mean that the new threshold would almost double the UK’s average property price which is currently £243,639.
It would also mean that, based on current levels, the average price on properties in all areas of the UK would be immune from SDLT; this includes London’s average property price of £484,584 according to the most recent HM Land Registry data.
The Prime Minister’s suggested reforms also aimed to stimulate the more expensive sections of the property market by reversing George Osbourne’s duty increases on homes valued over £1.5 million by dropping the 12% duty to 7%.
Sajid Javid, chancellor of the exchequer, commented: “More speculation about stamp duty this morning. To be clear, I never said to @thetimes I was planning to put it on sellers, and I wouldn’t support that. I know from @mhclg that we need bold measures on housing – but this isn’t one of them.”
Phill Hall, AAT Head of Public Affairs & Public Policy, said: “Switching Stamp Duty liability from the buyer to the seller isn’t a silver bullet for our myriad housing problems but it would make the system fairer because those moving up the ladder would be paying duty on the lower-priced house that they are selling, not the higher-price one they are buying. It would also remove every single first-time buyer from liability, irrespective of the cost of the house they are buying.
“It’s important to highlight that this change would save the taxpayer huge sums of money – almost £700m a year – whilst simultaneously protecting the billions of pounds Stamp Duty raises.”
How important would significant SDLT reform be to the property market?
