Will SDLT changes benefit sellers more than buyers?

The Chartered Institute of Taxation (CIOT) has highlighted HM Revenue and Customs (HMRC) research that questions whether stamp duty threshold changes announced today will be effective in terms of making home buying more affordable.  

The Chancellor Kwasi Kwarteng has confirmed that (effective today) the nil rate threshold at which stamp duty land tax applies will rise from £125,000 to £250,000; and for first-time buyers it will rise from £300,000 to £425,000. First time buyers’ relief is currently limited to purchases up to £500,000. From today, first-time buyers can claim relief on properties purchased for up to £625,000.

The increase in the thresholds at which house buyers will pay stamp duty is a permanent measure that applies only in England and Northern Ireland as Scotland and Wales operate their own land transactions taxes.

However, it is not clear to what extent buyers will benefit from the threshold increases. A 2011 HMRC study, evaluating the introduction of a temporary SDLT relief on transactions between March 2010 and 2012 initiated by the last Labour government concluded that cutting stamp duty had little effect on improving the affordability of homes and led to higher prices potentially benefiting sellers more than buyers.

Commenting, Marc Selby, Chair of the CIOT’s Property Taxes Committee, said:

“The Institute recognises that the effect of a permanent increase in thresholds in today’s conditions could be different from that of a temporary relief several years ago. But we call on the Government to commit to an evaluation of the policy to ensure that it meets its policy intent.

“It may be that a permanent relief will have a different behavioural impact than a temporary reprieve, but nevertheless the tension between the evaluation of the last measure and this reduction does underline the need for cuts to be properly evaluated.

“The way that stamp duty rates are calculated and applied to house purchases is complicated and difficult to apply in many relatively common situations, making them a good candidate for simplification.”