Recent analysis of HM Revenue and Customs’ Stamp Duty Land Tax (SDLT) statistics suggest the housing market is struggling with reduced transactions which is having a huge impact on the tax accrued by the government.
According to NAEA Propertymark and their subsidiary firm LCP, tax receipts for England, Wales and Northern Ireland have plummeted considerably when compared with 2017’s figures.
£8.7 billion was generated from tax receipts in 2018, this is £802 million less or a decrease of 8.5% when compared with the year before.
The tax on Higher Rate for Additional Dwellings (HRAD) has also failed to balance additional taxes with continued growth in the sector. If anything, it seems as though the lost income suggests fewer people are purchasing additional dwellings as the £285 million fall in taxes equates to a 14.2% reduction from 2017.
This reduced revenue also indicates a 4.6% fall in second home or additional dwelling transactions in 2018.
In 2017, 21.1% of all SDLT tax take was made up from HRAD receipts. However, this has shrunk to 18.8% in 2018.
Transactions overall, on average, fell by 2.6% in 2018 which emphasises the serious reduction in the purchase of second homes in 2018 with increased taxes and Brexit issues deterring potential investors from entering the market.
Naomi Heaton, CEO of LCP said: “The 2.6 per cent fall in transactions reported in HMRC’s 2018 SDLT report reinforces the surfeit of statistics, showing buyers now holding back. The febrile political climate around the UK’s departure from the EU and stagnating prices, have brought ever growing uncertainty to the residential market, following several years of increased taxation”.
Heaton adds: “Receipts have followed suit with transactions, which have fallen 8.5 per cent overall. The receipts from the three per cent additional duty (HRAD) have suffered the largest drop, falling 14.2 per cent. This has been the result of dwindling numbers of second home and rental purchases. The total revenue for HMRC amounted to £8.669bn, a fall of almost £1bn on 2017. Even if the amount of tax claimed under First Time Buyers’ Relief, which the Exchequer would see as a ‘tax giveaway’ was added back, the total take would still be down 3.6 per cent.
“HMRC’s 2018 stamp duty statistics do not paint a rosy picture of the UK housing market, with neither the buyer nor the Exchequer winning out. Until the government has a clear road map for Brexit, we are unlikely to see increased transactions and therefore increased revenues.”
How significant will these reductions be for conveyancers? Are changes needed to stimulate the buy-to-let sector?
