Although SDLT receipts have been volatile in recent years, the property tax’s effectiveness as a revenue-raiser for the Government is not in doubt.
SDLT receipts for the 2022/23 tax year are estimated at £15.40 billion – a 9.2% rise from on the previous year. The latest finalised HMRC figures show that receipts for 2021/22 increased by 63% to £14.10 billion from £8.67 billion in 2020/21..
Stamp duty transactions and revenues are distorted by regular tinkering with the SDLT regime and by the vagaries of the property market, and have been up and down over the last few years.
But SDLT earned just £3.68 billion for the Treasury in 2000/01, so the take in 2022/23 represents a four-fold nominal increase in just over two decades. If SDLT receipts had grown by the same rate as consumer prices index inflation since 2001, the annual take for the Treasury would by 2023 have stood at just £6.61 billion.
The perception that it has become a rather intrusive and arbitrary ‘stealth tax’ has made it unpopular among both potential and actual homebuyers. But also it has come under increasing criticism for congesting the property market and even damaging UK business by restricting labour mobility.
IFS chief Paul Johnson has stated quite boldly that he thinks SDLT is in dire need of reform and that abolishing it in part or in whole – at a cost of between roughly £4.5 and £9.0 billion – could mobilise the housing market and help to revive the UK economy.
A flagging housing market and a sluggish electorate could well prompt the Chancellor to look at extending stamp duty reliefs at the spring Budget on 6 March. That could take the form of an extension to the thresholds at which SDLT is paid, a reduction in the rate of SDLT or another temporary SDLT holiday.
If Jeremy Hunt does not receive the good news he is hoping for on the public finances in the coming weeks, giving him the fiscal headroom he needs for a big giveaway on something like income tax, then it’s more likely he will look at relatively inexpensive cuts to more targeted levies like SDLT or inheritance tax.
A slow property market tends to depress consumer confidence and the wider economy, so Mr Hunt could present an SDLT cut as a tactic in pursuing his growth strategy.
It seems beyond dispute that large SDLT bills are a disincentive towards downsizing for older homeowners. Among those who have more space and rooms than they need, many are willing to move to a smaller property to free up some equity and add to their retirement savings. But as they calculate the many substantial costs of moving, including stamp duty on a purchase, they are deterred from acting.
Many retirees instead resort to equity release and lifetime mortgages but such loans can become unexpectedly expensive and burdensome, and in some cases leave a nasty surprise for the beneficiaries of an estate.
This blockage in turn contributes to a dearth of family homes on the market and makes it less possible and more expensive for younger buyers looking at in-demand areas to move into larger properties. The notion that stamp duty acts as a drag on moving at this and other rungs on the property ladder – and therefore on overall economic productivity – could yet propel it into the General Election narrative as a policy issue.”
* Adrian Lowery, financial analyst at leading wealth management firm Evelyn Partners *
