When the pandemic hit, Propertymark lobbied to get the market reopened as well as a Stamp Duty Land Tax (SDLT) holiday.
The idea was that a tax relief would increase consumer confidence, encourage movement again within the housing market and help to boost the economy.
Since June 2020 the market has soared; lifestyle changes, the race for space and changing work commitments have all been motivations elevated by the SDLT holiday and cheap borrowing.
To keep momentum, realistically, what should the UK Government now be looking to do as the holiday ends?
Many other countries do not have SDLT at all but it’s clear that a push to abolish it entirely would be dismissed by decision makers.
Think tanks and academics have previously proposed a Land Value Tax, replacing Council Tax and SDLT.
The ramifications of which could affect house values, keeping them low and putting more scrutiny onto valuers. It’s even been discussed that sellers should pay tax – not buyers; but in a market that’s starved for stock that could do more harm than good.
Arundel & South Downs MP, Andrew Griffith (pictured) recently called on the Chancellor to introduce a SDLT break for ‘downsizers’ which has the potential to release the current logjam of underoccupied properties preventing families from moving onwards.
Mr Griffith said “I encourage the Government to bring forward an exemption to stamp duty for downsizers. With an ageing population, too many homeowners rattle around in accommodation that would be more suitable for growing families.”
Whilst Propertymark would be in favour of his calls in principle, another aspect of SDLT the UK Government need to look at are the outdated levels at which people start paying stamp duty to reflect the current market.
Propertymark lobbied in Wales when Land Transaction Tax was introduced, stating similarly the need to reflect property prices, securing the nil rate threshold at £180k.
Out of date
But under SDLT, the rates and values have not been reviewed since the tax was reformed in 2014. Since then, average house price and wage growth mean the bands are no longer reflective.
Lifting the value of property from £125,000 for the nil rate band in line with the average house price inflation would still provide the UK Government with revenue whilst incentivising a greater number of consumers, keeping the market moving.
The rates could go even further to become appropriate as even lifting the nil rate band doesn’t allow for the immense disparity in local housing markets; consider that Jersey and Northern Ireland, whose markets prices are entirely different, follow the same banding pattern and the process starts to look nonsensical.
Looking to the private rented sector for inspiration, the Broad Rental Market Areas model for calculating Local Housing Allowance rates works on percentiles of value relative to local markets. This process is more intelligent and considers geographical price differences.
It’s clear that our system needs an overhaul and with the end of the SDLT holiday leading into the Autumn Budget and Spending Review 2021, now is the time for the UK Government to reflect on the recent market activity and the wider economic benefits.