Chancellor's stamp duty changes create major tax revenue deficit, report claims
The changes to Stamp Duty Land Tax (SDLT) made by Chancellor George Osborne in December 2014 led to a 12.1% decline in revenue for the Government in the first ten months of last year, according to a study by estate agency Knight Frank.
In his 2014 Autumn Statement, the Chancellor introduced a graduated tax with rate bands, similar to the income tax system. Under the new rules, no tax is paid on the first £125,000 of a property, followed by 2% on the portion up to £250,000, 5% on the portion between £250,000 and £925,000, 10% on the next portion up to £1.5 million and 12% on everything over that figure.
However, the research by Knight Frank revealed that there was a £620 million deficit in stamp duty revenues between January and October 2015, compared with the same period the year before.
The estate agent claimed that there was an over-reliance on stamp duty from London, which has the greatest number of properties liable to the highest rates. The capital accounted for some 44% of all stamp duty receipts between January and October 2015, but transactions in the capital declined by £105 million during the period, which, at 10.1%, was the highest rate of decline in England and Wales.
No area of the country saw an increase in stamp duty receipts during the first ten months of 2015. Wales and the North East saw the biggest declines at around 30%, but these areas contribute relatively small amounts to the total.
Tom Bill, head of London residential research at Knight Frank, stated: ‘The Government is on the way to relying on London for half the country’s stamp duty revenue yet it is the area which appears most sensitive to recent and proposed stamp duty reforms.
‘A series of factors contributed to the decline, including tighter mortgage lending rules, higher rates of stamp duty above £1.1 million and a shortage of supply. The risk with higher transaction costs is that you actually lower the tax take and reduce social mobility to the point it becomes counter-productive.’