Wednesday 26 November will see the Chancellor present her Autumn 2025 Budget to Parliament.
With wholesale changes mooted, Rachel Reeves has been rumoured to be looking at the reformation of Stamp Duty Land Tax (SDLT) as a viable option to get a stagnant housing market moving again.
Introduced in 2003, SDLT is a payment which is made by those purchasing property or land in England and Northern Ireland.
Although recent rumblings suggest a move away from a major overhaul of SDLT, with the Budget looming, we sat down with Knights’ Tax Partner, Julian Moran to gauge what would happen if SDLT was stripped back and, if so, whether it achieved what it set out to do. He said:
“I’d been a qualified lawyer a little over a year when SDLT came in and it was a big change as it fundamentally replaced what was a quite a simple tax with a small number of low rates, in Stamp Duty.
“It was fundamentally different in that it was a tax on transactions rather than a tax on the documentation and effect of the transactions. I think the principal reason for its introduction was to reduce tax avoidance and increase compliance – adding a lot more rules.
“All in all, I think it’s been a very successful tax for the government as it seems to have generated a lot more revenue than stamp duty used to do. The rates when it was first introduced, ranging between 1% and 4%, were kept in place for about five years but, since that time, they’ve increased dramatically – with the top rate for certain buyers sitting at 19%.
“It’s also helped developed how we look at the rules associated around property tax as it’s been used to implement policy for the government and encourage certain behaviours – creating a very sophisticated, yet complex, tax.
“When looking forward to this Budget, it’s difficult to ascertain what the Government’s primary considerations are. There’s obvious concern around a stagnant housing market as there’s not enough movement and mobility at the lower end of the market and this could be because house prices are flattening.
“In my experience, the cost of SDLT doesn’t seem as manageable to buyers when prices are struggling as it does when house prices are on the rise, so I’d say they’d be less open to moving at times like these.
“To fix this issue, there’s been a lot of discussion around the potential of removing stamp duty land tax and I think there’s credence in that argument – especially with it being a very complicated issue. One way to reenergise the market could simply be to remove SDLT for the main home, providing it’s valued under half a million pounds, and perhaps that’s all that’s needed.
“For those with homes over that £500,000 figure, there is talk of an annual tax charge which would remove the burden from the buyer and place it on the homeowner. Now, whether that measure is introduced or not is just mere speculation but, practically, I think that seems a little more difficult given the fact some just won’t have the ability to pay out the necessary tax in one go.
“If you’re going to remove SDLT then targeting those homes under half a million pounds is a good way to get the housing market moving but, if it’s not being scrapped, then simplifying it would be a helpful move for all concerned – from practitioners to buyers.
“Sometimes introducing a new tax can bring with it a new system which generates more revenue but, I would say, the principal reason is to encourage buyers in the market. I think it’s now unlikely we’ll see that overhaul to SDLT but we’ll have to see what the Chancellor announces and how her decisions will impact the housing market.”