The Stamp Duty Reforms In The Autumn Statement Will Cost The Government Hugely

 

The Stamp Duty Reforms In The Autumn Statement Will Cost The Government Hugely

I am all for reforms in the Stamp Duty process and, in fact, have been lobbying for years to have the system reformed so that it was not so ‘slab sided’.  So hooray to the Treasury since the £2million threshold hitherto had stopped any sales from £2-£2.5million which was getting ridiculous.

The only problem is to the Treasury SDLT is like a ‘golden goose’ laying ‘golden eggs’ that are easy to harvest.  They increased the Stamp Duty rates in the 2012 Budget by 40% and 300%(for corporate purchases) that significantly curtailed the market place in the higher ranges (each sale that didn’t take place cost the Treasury money).

This cost of purchase is the highest in the world and in the Autumn Statement the Chancellor increased them by, effectively, 71%.  This means that in the last three years Stamp Duty for personal purchases has increased by 240%.   This in anyone’s language is a humongous game-changing amount.

By way of illustration: if you are selling a £2million house and buying a £4million house to increase the space for your family (and neither of these amounts buys you a castle in London today) £450,000 alone will go towards SDLT/agents and solicitors fees.  Effectively this is 25% of the value of your present home that cannot be mortgaged and buys you effectively nothing.

However, a canny householder will use the money instead to buy loft conversions, ground floor extensions and basements that could create 1500-2000sqft of extra space that should provide all the extended accommodation that they require and when the property is sold they will make a handsome tax-free capital gain (the sale price will greatly exceed the cost of construction).

It is a recipe for ‘Stopathome’.  This is bad news for the Treasury since there will be fewer transactions and although no one will shed a tear at losses accrued buy estate agents or conveyancing solicitors they will suffer accordingly.

Less money for the Treasury yet via the tax give away at the lower end they are stimulating the market up to £500,000 that did not need any further encouragement.

I can understand that the Coalition wanted to bribe the electorate at the affordable price ranges and have these funded (so as not to exacerbate the deficit) but we all know that it wont be and will cost the government a fortune and create suffering elsewhere.

Agents tell me that in their price ranges up to £1.5million, in January 2015, turnover is down by 25% as a result which demonstrates that the ‘medicine is not working’ and with the spectre of Mansion Tax looming like ‘black death’ we are heading for troubled waters.

In our business we call this an own goal!