Stamp duty: government rejects calls to permanently reform the tax
In recent years, there have been calls to overhaul Stamp Duty Land Tax (SDLT), and this has increased in the past year. But the government has said it won’t permanently cut the tax. Some professionals in the property industry and MPs have called on the government to bring in a permanent stamp duty cut. In a document published on Wednesday 2 June, the government rejected this. MPs on the Treasury Committee recommended reforms to stamp duty. This was after witnesses to its inquiry into tax after the COVID-19 pandemic.
The property tax was described as not being fit for purpose. The committee also said the tax in its pre-pandemic form was “economically inefficient, causing damage to the economy by affecting when people buy homes.” However, the government responded to its inquiry, saying: "SDLT is an important source of government revenue. It is simple to collect and administer, and helps pay for the essential services the Government provides.” Looking at SDLT The government argues that many buyers were already exempt from stamp duty.
It stated that 34% of homebuyers didn’t pay any SDLT in 2019-20. This is because they either benefited from the lower rates for first-time buyers or the property was under the minimum threshold of £125,000. In 2019-20, stamp duty for residential properties raised £8.4bn for the public purse. The government response included: “At a time when the Government needs to consider long-term fiscal sustainability, any permanent cut or removal of SDLT would be likely to have a significant cost to the Exchequer.
” The temporary tax holiday In July 2020, the temporary stamp duty holiday was introduced to restart the housing market after closing for eight weeks during the first national lockdown in the spring of 2020. This has meant that no SDLT was due on the portion of a home purchase up to the value of £500,000. This has saved individual homebuyers up to £15,000. The temporary tax holiday's original deadline was 31 March 2021. However, a three-month extension was announced in the Spring Budget. The £500,000 nil-rate band is in place until 30 June.
From 1 July to 30 September, the stamp duty nil-rate threshold will move to £250,000. From 1 October, the rates will revert to pre-pandemic levels. With the stamp duty holiday deadline nearing, there is rising pressure on the industry as property transactions are taking longer than usual. The risk of some property sales not completing by the deadline is increasing. There's a petition calling for the stamp duty holiday to be triggered upon exchange of contracts instead of at completion. At the point of exchange of contracts, the sale becomes legally binding.
This would predominately help buyers of new-builds. The petition has racked up over 13,000 signatures. The government must respond to petitions posted on Westminster’s official website that receive more than 10,000 signatures. However, it hasn't made any comment yet. Source: Stamp duty: government rejects calls to permanently reform the tax