When the introduction of the stamp duty land tax (SDLT) surcharge on additional properties was announced in the Autumn Statement 2015, it was estimated that the measure would contribute an additional £625m in receipts in its first year, 2016/17. However, latest figures attribute almost three times that amount - £1,705m - to the new surcharge. At the same time, SDLT revenues as a whole increased by 17 per cent over the previous year despite an eight per cent fall in transaction numbers.
Drilling further down into the figures it becomes clear that a large proportion of the overall increase in receipts is due solely to the surcharge as the increase in property transactions values is relatively small. For example, in respect of properties valued at more than £1m, 44 per cent of the receipts were from additional properties.
The increase comes about despite many landlords bringing forward property purchases to before 1 April 2016 to ensure the 3 per cent surcharge did not apply. Clearly this surcharge is having a significant impact on private landlords, many of whom have also been stung by the recent changes to mortgage interest relief. London and the South East bear the heaviest burden when it comes to SDLT, contributing 60 per cent of all SDLT revenue in England in 2016/17. While this may simply reflect higher property values in those areas, it does call into question the idea of fairness within the tax system.
The figures for the Scottish equivalent, land and business transaction tax (LBTT) which replaced SDLT in Scotland from 1 April 2015, show a similar if subtly different picture. Here we can see again an overall increase in LBTT revenues. However, in this case it was below the budget forecast. An indication perhaps that property prices, and maybe the property market in general, have already been adversely affected by the new surcharge north of the border.
The combined result of increasing interest rates, increasing SDLT/LBTT, decreasing tax relief and even potential rent controls preventing landlords from increasing rents to cover the additional costs, may indeed signal a chaotic period for the residential property market. It is to be hoped that the Chancellor does not inflict any further pain on private landlords in the Autumn Budget.
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