What should we expect from the Budget for the higher rates of stamp duty land tax (the 3% surcharge)? Will it increase to 5%?
Figures published at the end of September 2018 for the tax year ending in April 2018 show that £1.895 bn was raised from the extra 3% SDLT on additional dwellings. This far exceeds the £0.695 bn additional revenue predicted for the year in the papers issued with the March 2016 Budget which introduced the surcharge with effect from 1 April 2016.
The original policy objective was set out in the consultation paper of November 2015: “The measure is designed to try and redress the balance between those who are struggling to buy their first property and those who are able to invest in additional properties”. Perhaps this has not been achieved, as the recent figures for last tax year show that 23% of residential transactions were categorised as additional properties and these transactions accounted for 44% of all SDLT receipts.
First time buyers’ relief which came in on 22 November 2017 has arguably been more effective as a policy to encourage home ownership as 19% of residential transactions from then until the end of the tax year claimed the relief.
At the start of the month, at the Conservative Party Conference, the Prime Minister floated a proposal for even higher rates of SDLT for those buying dwellings who do not pay UK taxes. This would be difficult to achieve technically and take time to implement and would make an already fiendishly complicated system even harder to navigate. It is with the benefit of hindsight that I now read with bitter amusement the sentence “Lawyers and conveyancers are expected to incur negligible one-off costs due to familiarising themselves with the new structure of SDLT”. This appears under the heading “impact on business" in the notes issued with the 16 March 2016 Budget describing the effects of the higher rates on purchases of additional residential properties. Far from there being a “negligible” effect, the HMRC helpline was flooded by confused taxpayers unable to understand the new rules and many conveyancers now exclude responsibility from advising on these SDLT rules and send their clients away to get specialist SDLT advice from those of us who have taken the time to grapple with the complexities of the rules.
Here is a thought as to what we might have to look forward to in the Budget on 29 October 2018. The higher rates could be increased from the existing 3% extra to say 5% extra. Despite the recent downturn in the volume of residential transactions and stamp tax receipts generally being down 5.4% for April to August 2018 compared to the same period last year, an increase could be justified by the Treasury in a number of ways including:
- The 3% has not proved enough of a deterrent to those intent on acquiring a portfolio of properties, as the figures for the last tax year demonstrate.
- A higher surcharge will, combined with first time buyers’ relief, further redress the balance for those wanting to buy a property to live in.
- This is a simpler and more expedient way of raising more SDLT from foreign buyers than having a separate surcharge for them.
- It will go some way to raising the extra £20 bn a year by 2024 promised for the NHS in June 2018 by Theresa May.
For professional advice on stamp duty land tax please contact Blake Morgan's SDLT specialist, John Shallcross.