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Did George shoot the golden goose with his SDLT increases 18 months ago?

9th November 2017

When George Osborne increased the Stamp Duty Land Tax (SDLT) with effect from 1 April 2016 on additional homes by 3%, there was understandable concern that this increase might unduly depress the residential property market. However, the recently released quarterly SDLT government statistics made interesting reading as to the effect of this increase, even if one is reminded of the “Yes Minister” sketch from the 1980s when Sir Humphrey responds to Hacker’s question of “but they are just lies, aren’t they?” with a reply of “No Minister, they are Government statistics”!

Firstly, if we look at the number of residential transactions in each quarter since 31 December 2010, split by value of the property, it is evident that in 2016 Q2 (the period immediately after the 3% additional rate was imposed) there was a distinct fall in transaction activity. This is unsurprising as it was evident in 2016 Q1 forestalling was taking place to get transactions completed before the 3% increase was effective. However by 2016 Q3 transaction levels had largely recovered as shown below.

Looking specifically at residential properties with values above £1 million, the statistics also show a fall in the number of transactions in 2016 Q2, albeit for those properties above £2 million, the decline continued into 2016 Q3 before a recovery. 

Although 2017 Q1 saw a decline in transaction activity, with the exception of the £2 million plus market, this is consistent with the last six years reviewed and reflects the traditionally slower market in Q1.

When the current Chancellor reviews his options for his first Autumn Budget, he will inevitably consider the tax generated from SDLT. In 2016/17, SDLT contributed over £8.6 billion to the Exchequer’s coffers, a rise of nearly 18% on 2015/16. In 2017 Q1 and Q2 SDLT has generated nearly £4.4 billion compared to just under £3.7 billion for the first half of 2016, a rise of over 18%. The following graph shows the upward trend in SDLT tax revenues by quarter, since the start of 2011.

If you combine this increased tax revenue with no obvious decline in transactional activity and the political desire to encourage voters to own one home, it is difficult to see any strong reason why Philip Hammond will remove the 3% additional rate in November. There is also the political risk of removing a tax that might be seen as favouring a small class of, typically, Tory voters. This provides plenty of room for anguish with few, if any, votes to be gained. A weakened Government is unlikely to want another “pasty tax” furore.

So, in answer to the original question, it looks as if, far from shooting the golden goose of property, George Osborne found a way of increasing the tax take with little collateral damage.

Should you have any questions about SDLT please contact Ian Daniels, or your usual haysmacintyre contact