A growing number of housebuilders, landlords, agents, and property industry bodies are becoming increasingly vocal in their belief that reducing or even scrapping Stamp Duty would stimulate a stuttering residential property market but how will Stamp Duty be approached in the 2024 Spring Budget?
Possible changes could include an extension to the current thresholds, an overall reduction in Stamp Duty rates or another extended ‘Stamp Duty holiday’. Their choice could also be combined with a revised ‘help-to-buy’ scheme which would be popular with the house buying public. This is a proven tactic previous governments have used with success to reinvigorate the housing market.
While there are increased calls for changes to be made before Stamp Duty returns to where it was before the ‘Stamp Duty holiday’ was announced in 2020, it is important to remember that the current Stamp Duty regime will remain in place until the 31st March 2025. This means the purchase of a home under £250,000 will not incur Stamp Duty, homes from £250,001 to £925,000 will incur a duty of 5%, rising to 10% for homes up to £1.5m and 12% for those above that fee.
This means that while there is understandably some nervousness in the property market – particularly given an increasingly volatile economy – there is some certainty for those looking to buy in the medium term. If the proposed changes do come into force in 2025, there is still plenty of time to get purchases over the line.
There is also the argument that a year is a long time in politics and a potential change in government could well have its own effect on Stamp Duty. This is particularly important given the importance that will be placed on courting home buyers during campaigning ahead of the next General Election, most particularly in London and the South East.
With the economy still in a precarious state and an increasing number of property experts publicly stating the current slowdown in the UK housing market could be positively impacted by an extension of current Stamp Duty reliefs, the clamour for the government to tackle stamp duty in the upcoming Spring budget is growing.
It would be no surprise if these calls were heeded as the government is under pressure to find ways to grow the economy quickly.
The argument for extending the current relief was recently summarised perfectly by David Hannah, chairman of the Cornerstone Tax group. He feels an overhaul of Stamp Duty bands is “long overdue” as they have never been linked to the same levels of inflation as house prices.
More pointedly he believes an increase to stamp duty payment bands now would “stimulate activity at the lower end of the property market” by enabling first time buyers to reduce their total cost of purchase. This activity should, in Mr Hannah’s opinion, increase momentum in the higher bands of the property market.
The National Residential Landlords Association (NRLA) have gone one further and called for the government to consider scrapping Stamp Duty for landlords altogether in March. It is a move they believe will encourage would be investors to enter or increase their interest in the private rented sector. They believe this would generate an extra £10bn in corporation tax revenue for the government.
This view is based on research undertaken by Capital Economic. They estimate scrapping Stamp Duty for landlords could potentially lead to the purchase of an additional 900,000 properties.
Referring to this research, NRLA Chief Exec Ben Beadle said:
“The Chancellor needs to pull out all the stops to tackle the housing crisis. Growing the private rented sector is not only vital if tenant demand is to be met, but it would also provide a substantial boost to Treasury coffers, enabling it invest in vital public services. It makes no sense to discourage investment in desperately needed private rented accommodation. Inaction will only result in more misery for prospective renters.”
The government’s reticence to comply with the NLRA’s wished could be because it would be seen as a public reversal of a decision the then Chancellor George Osborne made in 2016.
He brought in the stamp duty levy for landlords in a bid to make more housing stock available for first-time buyers. This argument would be countered by a realisation that with mortgage costs rocketing and the cost of living crisis continuing to bite, making the market more attractive to landlords and investors could well present a more effective way to inject some much needed impetus back into the UK’s residential housing market.
Given how much work our property team does with both first time buyers and landlords, we will continue to follow this story and of course, report back on how the government changes its approach to Stamp Duty in the Spring Budget.
In the meantime, if you would like us to help you make the sale or purchase of your home as easy as possible, please contact us today.