The Agent Blog - Goodlord

Is it time to reform Stamp Duty?

Written by Paul Starkey | 22 March 2021

A guest blog by Paul Starkey, Chief Commercial Officer of Reapit.

Stamp Duty is hardly the public’s most-favoured tax (is there such a thing?) and the government’s recent extension of the Stamp Duty holiday deadline to the end of June will no doubt be warmly received by the pending buyers under pressure to push their transactions through before the cliff edge.

Extending the Stamp Duty holiday was indeed critical, as many buyers faced the unwelcome prospect of fees that they may not have factored into their planning. Rightmove estimated in late January that of the approximate 613,000 sales agreed in the pipeline at the time, there were around 100,000 sales set to miss out on Stamp Duty savings of up to £15,000.

However, whilst the extension of the Stamp Duty holiday deadline, as many requested, was arguably the right course of action, it does raise the question of whether extending said deadline is simply an act of kicking the can down the road as sales going through at a date closer to the new cliff edge risk falling into the same trap.

Perhaps now then is the right time to reconsider reforming the Stamp Duty tax itself. In a recent poll conducted on Reapit’s website, we asked visitors whether they believe that the SDLT should be reformed – 73% answered in the affirmative.

A market overview

Prospective buyers already face a more challenging market as high demand and supply bottlenecks have consistently fuelled annual increases to house prices, creating further financial burdens for savers. Average residential property prices increased 8.5% in the year to December 2020, according to the latest HPI data from the Office for National Statistics (ONS), up from 7.1% in November 2020, setting a new record high of £252,000 and presenting the highest annual growth rate in the UK since October 2014.

Indeed, while Stamp Duty has arguably made it harder still for first-time buyers purchasing a home over £300,000 to get on the ladder, it is particularly the case for existing homeowners looking to move. The recent reveal in ONS data that average house prices in London exceeded £500,000 for the first time in November would disqualify many buyers of any relief on the tax anyway, only adds to the financial pressures for new buyers in the capital after the Stamp Duty holiday expires. Of course, London is not the whole country, but it does reflect a growing issue that could spread throughout the UK as average house prices continue to increase.

Reducing the SDLT could make it easier for prospective buyers to raise a deposit and would likely enable a significant increase in transactions, just as has been achieved through the Stamp Duty holiday which resulted in a boom at the end of last year.

Potential hurdles

There would no doubt be some reluctance towards this move. Given the huge expenditure of Covid support measures, expected to reach a £210 billion total thus far according to the latest data from the National Audit Office, and the contraction of the overall economy (the national GDP fell 2.6% in November last year) threatening a double-dip recession due to the ensuing lockdown, it is understandable that the government will be keen to recoup as much tax as possible. The Stamp Duty levy raised almost £12 billion in 2019/20, with similar figures for prior years, and it would be an enticing target for when the Treasury looks to refill its coffers.

However, going by Housing Minster Robert Jenrick’s 14 January Tweet that the housing industry is vital to the recovery of the economy, perhaps actions can reflect words by taking the initiative to reform one of the UK’s most hated taxes.

Originally published on Reapit. Goodlord partners with Reapit to provide agents with one smooth tenancy journey - all in one place. Find out more.

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