The Government has been arguing for months that the Chancellor’s Stamp Duty holiday must end on 31st March because it needs to get its tax raising back on track.
And that is borne out by the latest SDLT figures which show the Government’s revenues from the duty, which covers all types of property, were down by £530 million during the last three months of the year.
This, it says, is due largely to the stamp duty holiday for residential properties; receipts for that part of the SDLT were down by 22% on the same period of 2019.
This is because during the final three-month of 2020, 34% of residential transactions were liable for SDLT compared to 66% in Q4 2019.
It could have been worse, but happily for the Chancellor his Stamp Duty holiday only includes the portion of a home’s value under £500,000. Someone buying a £600,000 home, for example will still pay 5% Stamp Duty on the £100,000 over the £500,000 threshold, or £5,000.
But after 31st March, if they still haven’t completed then the same buyers would pay £15,000, or £10,000 more in stamp duty.
It is not surprising that the Stamp Duty holiday has been such a shot in the arm for the housing market which HM Treasury figures show, during the last quarter of 2020, were 43% higher than the previous quarter and 16% higher than the year before.
“Today’s figures clearly show the positive impact the SDLT holiday has had for the property sector and the UK economy since its introduction.
“I would therefore urge the Government to consider a more gradual approach to paring back SDLT relief,” says Nick Leeming, Chairman of Jacksons-Stops (pictured).
Tax expert view
“These statistics demonstrate what we have known for some time, that the lower end of the market – while responsible for the majority of purchases – has a smaller impact on the overall tax take. It also reiterates the need for some kind of move to avoid a stamp duty holiday cliff-edge,” says David Hannah, Founder and Principal Consultant of Cornerstone Tax.
“Calls to make the holiday permanent or scrap the tax altogether seem unrealistic given the levels of public debt and the £12 billion tax take it generates each year, but having such a strict cut-off point, particularly in such a turbulent and difficult housing market and economic climate could result in a catastrophic drop in demand and prices.
“Raising to the nil-rate band, to somewhere around £300,000, will benefit the majority of buyers without affecting a large amount in tax revenues, which is obviously key to the recovery of public finances.
“These statistics demonstrate the importance of keeping the market moving to other sections of the economy and first-time buyers, those likely to spend less than £300,000, are the driving force behind this movement.
“Home ownership is key to the UK economy, upward mobility and the aspirations of many that are currently struggling to get on the property ladder.
“Not only this but making it easier to move house without being penalised for doing so will make it easier to move to areas of growth and where jobs are. Especially important as we see a de-urbanisation and migration away from cities in the wake of the pandemic.”