New stamp duty land tax (SDLT) rates for second homes, which came into effect last April, have raised an extra £2 billion in tax for the government.
The introduction of a 3 per cent stamp duty land tax (SDLT) surcharge on buy-to-let properties and second homes has landed the government a £2 billion windfall, figures show.
Number-crunching carried out by Blick Rothenberg, the accountancy and tax firm, found that while the number of property transactions in the UK has been broadly the same over the past two years (from end of July 2015 to end of July 2017), SDLT receipts have increased by 20 per cent, equivalent to an extra £2 billion in tax.
The figures supplied by HM Revenue & Customs (HMRC) do not not identify the specific number of second home and buy to let property purchases that have been affected by the higher SDLT rate.
However, Robert Pullen, director at Blick Rothenberg, says that while some of this increase could relate to general property price increases, the biggest driver will have been the stamp duty surcharge on additional residential properties.
Pullen argues that while the intention behind SDLT was to realign the residential property market to make it fairer for first time buyers, it has instead been a tax grab.
‘It is becoming clearer that as prices continue to rise, the measure has succeeded only in generating extra tax for HMRC. The government will need to urgently consider whether the additional 3 per cent SDLT policy is helping achieve fairness in the property market, or if it is creating more problems than it is solving.’
Other experts agree. Colby Short, chief executive of GetAgent.co.uk, the estate agent comparison website, says: ‘There is nothing that shows the stamp duty surcharge has prompted an increase in first-time buyers, which is what the chancellor had hoped for. First-time buyers still have the struggle of raising the capital required for mortgage deposits.’
Short adds that on the ground, anecdotally ‘there definitely appear to be fewer BTL purchases since the stamp duty changes’.
He says: ‘But this could be down to the fact that there was such a push to complete on second homes just before the change in April 2016. We suspect BTL investors will jump back into the property market once they become more familiar with the additional costs and how to absorb them.’
He suggests the bigger challenge for landlords may in practice be coping with the mortgage relief tax changes, which are being phased in since April and will limit tax relief on rental property finance costs to the basic rate of tax. ‘We might see a lot more landlords selling up and more stock available for first time buyers in the future,’ he says.
The SDLT impacts those who are purchasing buy-to-let properties, holiday homes or helping a family member to buy their first home. The additional stamp duty for those buying a second home is 3 per cent higher than the rate charged for those buying their main residential property.
• 3 per cent, instead of 0 per cent, on properties up to £125,000 (so £3,750 on £125,000)
• 5 per cent, instead of 2 per cent, on properties from £125,001 to £250,000
• 8 per cent, instead of 5 per cent, on properties from £250,001 to £925,000
• 13 per cent, instead of 10 per cent, on properties from £925,001 to £1.5 million
• 15 per cent, instead of 12 per cent, on properties costing more than £1.5 million (so £225,000 instead of £180,000 on £1.5 million)