The Treasury looks set to suffer a near £5bn tax hit due to the coronavirus pandemic.
The Covid-19 outbreak has led to a sharp decline in property sales, with Savills projecting that there could be a drop of between £4.78bn and £3.47bn in the tax this year due to the existing crisis.
With the government advising that people put their home move on hold until lockdown restrictions are lifted, housing market activity has ground to a halt. .
Before the outbreak the expectation had been that the Treasury would net £8.57bn from residential property sales in England and Northern Ireland this year. Scotland and Wales have separate systems.
In the worst case scenario, Lucian Cook, head of residential research at Savills, has calculated that a predicted 1.06 million house sales in 2020 will fall to 495,500, in which case prices will fall by 10% resulting in a £4.78bn slump in stamp duty.
In the best case, the number of sales will drop to 652,634 and prices will fall by 5%, resulting in a £3.47bn drop in taxes.
Savills expects transactions and prices to improve in 2021 although they might still result in a subdued stamp duty haul for the Treasury, down by between £800m and £1.56bn on previous expectations.
Cook commented: “A lot will depend on what happens at the top end of the property market as these represent a significant amount of the tax take for the Treasury and also what happens to the new-build market and how quick house builders can get back to work.”
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