Business

Stamp duty land tax boosts tax receipts

Estate agent's window Image copyright PA

The UK government is on track to raise a record amount of tax from property sales, despite a fall in the number of home sales.

Official figures show that £7.7bn has been raised from stamp duty land tax (SDLT) during the first eight months of the 2016-17 financial year.

That is 12% more than was raised during the same period the year before.

But this has come despite a 10% drop in the number of homes being sold in the UK.

Between April and November this year, 782,000 homes were sold, down from the 868,000 sold in the same eight months of the previous financial year.

Even if that trend continues, the exchequer's revenue from stamp duty may still exceed the previous record of £10.7bn raised during 2015-16.

Big changes

The increased tax take reflects two big changes to stamp duty in the past two years, as well as the impact of the continued rise in average house prices, which have gone up by 7% in the past year.

In December 2014, the whole SDLT system was overhauled and new tax rates were brought in.

These range from 0% on homes worth £125,000 or less, up to 12% on the top slice of homes worth more than £1.5m.

The overall effect of the new system is that stamp duty has been cut for the 95% of buyers who buy homes worth less than £1m, but has been raised for those buying more expensive properties.

Then, in April this year, a SDLT surcharge was brought in for anyone buying a second home.

This added a further three percentage points to the rates they would have otherwise paid.

Property commentator Henry Pryor said these changes were now depressing the number of transactions at the top end of the market.

And he warned this might eventually feed into the government's tax take.

"While there has been a direct impact on transactions at the top of the market, there is as yet no evidence to support those who have been calling for the chancellor to rethink the rates applicable to buyers of the most expensive properties," he said.

"But estate agents estimate that more than 40% of SDLT revenue comes from within the M25.

"And the number of all transactions in London was, in August, 39% down on a year ago, so this will inevitably create a hole in the chancellor's accounts in due course."

Jonathan Hopper, managing director of Garrington Property Finders, said: "Buy-to-let investors will understandably feel aggrieved at the stamp duty surcharge they now face, but their calls for April's increase to be reversed are likely to fall on deaf ears."

Image copyright HMRC
Image caption Source: HMRC

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