With SDLT receipts declining something needs to be done to reinvigorate the market if the Governments is going to close the gap in its budget.
Stamp Duty Land Tax (SDLT) has been a divisive tool used to stimulate the property market in recent years. Whilst the stamp duty relief on housing transactions valued under £300,000 for first-time buyers (FTBs) has been said to stimulate a flattening property market, a surcharge imposed on additional property added to accusations of the Government victimising property investors.
Currently, properties priced over £125,000 pay a tax on a sliding scale, starting at 2% and rising intermittently up to 12% on the remaining amount of property valued over £1.5 million.
SDLT Receipts Decline
The tax is obviously a bugbear and pain point for many existing property owners looking to move up the property ladder.
One important issue remains clear in the current climate, SDLT receipts are declining and becoming a less lucrative or important tax to Governmental coffers, but still have the potential to restart a stalling residential property sector.
Receipts for the opening quarter of 2019 highlight that the Government accrued £2.6 billion through SDLT. This represented a 19% reduction from the final quarter of 2018. Additionally, residential receipts also fell by over a quarter (26%) during this period.
As this source of income dwindles, it is unsurprising that prospective politicians have popped SDLT into their policy promises in a bid to stimulate the market and appeal to the electorate.
Increasing the SDLT Threshold
Boris Johnson previously announced possible SDLT changes following an emergency budget if he was elected.
During a husting event in Bournemouth, Johnson promised to overhaul the current SDLT system by raising the minimum threshold from £125,000 to £500,000.
If Johnson is voted in and fulfils his promise, it would mean that stamp duty is effectively abolished on all averagely priced properties in England and Wales.
The new allowance is almost double the average UK property price which is currently £228,903 according to the most recent HM Land Registry figures.
The allowance will also ensure that average properties in London and the South East will also be immune from Stamp Duty Land Tax charges as the average property is currently just below the proposed £500,000 threshold at £484,000 in London.
Helping Reinvigorate the Prime Housing Market
Whilst this may encourage reluctant house hunters living in averagely priced homes to move, Johnson is also looking to reinvigorate the prime and super prime property markets by rescinding the excessive duty increases imposed on expensive property in 2014 by the then Chancellor, George Osbourne.
In 2014, the SDLT duty on houses priced between £925,001 and £1.5 million doubled from 5% to 10%. Properties valued over £1.5 million were forced to pay 12% SDLT on the amount exceeding £125,000; this also represented a 5% rise from 7%.
In England and Wales, prime property valued up to £1.5 million fell by 3.72%. Noting a distinct decline in the movement of prime and super prime property in England, a Boris Johnson administration has promised to revert duty levels back to pre 2014 rates.
Economists believe that this will improve property prices by at least 4.5% and should encourage a lot more movement with this section of the property market.
Whether this is a legitimate attempt to reignite a slow property market, or just a popular political ploy to ensure he bags the keys to Number 10, it is clear that SDLT changes could have a big influence on the property market in the future.