Land and property stamp taxes are falling demonstrating the impact of falling house prices and market activity as well as changes to the tax itself. It is interesting to delve into the detail of just how much and why.
HMRC’s annual stamp taxes statistics for 2018-19 show that total stamp tax receipts fell by 5% to £15,560m between 2017-18 and 2018-19. Keenly watched data on land and property stamp taxes (SDLT) show a decrease of 7% to £11,940m.
This is significant because, until 2018-19, SDLT receipts for both residential and non-residential transactions have increased steadily since the credit crunch and economic downturn.
Receipts are affected by a number of factors including property price inflation, market activity (transaction numbers) and a series of changes to the tax itself. HMRC estimates that, without first-time buyer’s relief (FTBR) and the devolution of taxes to Wales, the fall would be less than 3%. But that would still be the biggest drop since the credit crunch and economic downturn of 2008-09.
The effect is greatest in respect of residential properties.
Residential SDLT receipts decreased by 10% (£905m) to £8,370m between 2017-18 and 2018-19. The decrease in receipts is partly due to FTBR and devolution of SDLT to Wales, as well as the fall in transactions over £1m, dropping by 8% since last year. In a sign of a market slow-down, residential transactions decreased by 6% (70,000) to 1.036m residential transactions between 2017-18 and 2018-19.
218,900 residential transactions benefited from FTBR in 2018-19, with an estimated £521m relieved in total. 2018-19 was the first full tax year of FTBR claims.
Properties valued at £250,000 or less accounted for 59% of all transactions, and 11% of the total SDLT receipts, whilst properties over £1m accounted for nearly 3% of transactions and over 45% of total SDLT receipts.
The figures for second homes and let properties tell their own story. In 2018-19 230,600 transactions fell within the regime for higher rates on additional dwellings (HRAD), a decrease of 9% (21,900) from 2017-18. HRAD receipts were £3,810m in 2018-19, a decrease of 6% (£250m) from 2017-18. This may be a knock-on effect of private landlords selling let properties, following all the other tax changes affecting that sector.
The downward trend for non-residential transactions is not so severe: receipts decreased by 2% (£60m) to £3,570m between 2017-18 and 2018-19. This too reflected the devolution of SDLT to Wales. Non-residential transactions decreased by 5% (6,000) to 115,000 non-residential transactions between 2017-18 and 2018-19.
Few areas are spared the fall. In England and Northern Ireland, most regions show decreases in SDLT receipts except for East Midlands and Yorkshire & Humberside. Despite the falls, London again accounted for the most SDLT revenue (£4,545m; 38% of total SDLT receipts).
George Bull is senior tax partner at accountants RSM
Further reading: Property tax changes guide will help you through the maze