‘I’m a property expert – here’s what Rachel Reeves must do about stamp | UK | News
A property expert has weighed in on Rachel Reeves’ report on stamp duty changes due to be announced in the autumn budget. Details of the Chancellor’s autumn budget will be announced on November 26 and reports are circulating of the multitude of changes Reeves has planned. These include a complete overhaul of stamp duty, which the Chancellor is said to want to abolish and replace with property tax.
But critics pointed out potential problems with Reeves’ reported plans. Property tax will make homeowners pay more tax and will replace council tax. A real estate expert suggested alternatives he believes Reeves should consider. Kingsley Napley Private Client Tax Partner Paul Davidoff shared his insights and explained how the proposed changes would benefit very few people.
He said: “Most of the options being considered aim to either increase the tax burden on those owning or buying higher value properties (over £1.5m in some cases, just over £500k in others) or to spread the cost over the period of ownership of the property rather than making it a large one-off upfront cost. “The upfront cost of SDLT can be a real barrier to getting on the housing ladder in the first place, and can also be a real barrier to getting on the housing ladder in the first place. It is a deterrent to carrying.
“The move from paying SDLT on purchase to paying on sale or disposal was mooted some time ago. It’s hard to see how this really benefits anyone other than a first-time buyer whose SDLT liability is already quite modest.”
“Also, intriguingly, this will also reduce the immediate tax charge for a number of years (assuming those who have already paid SDLT on their purchases will be given relief when they come to sell).
Paul also warned that such a change could make existing mortgages unaffordable for some homeowners. He continued: “Another idea that has been mooted is to scrap SDLT altogether, replacing it with annual property tax on properties over £500k, perhaps with a higher rate on properties over £1m. This could be payable annually, or an amount that accumulates over time and becomes payable on sale (this is when CGT would be payable – but principal residence relief generally applies to residential properties).
“Again, some transitional assistance will be required for those who have already paid SDLT when buying a home. For those who have a mortgage and have borrowed what they can afford, the addition of additional monthly/annual expenses may make their mortgage unaffordable. The same may even apply to those who do not have a mortgage but are income-limited, for example those who are retired but do not have much retirement income or savings. Additionally, under the current regime, no SDLT will apply to the gift of a property or may be paid on inheritance: does the same apply to this tax and is it calculated by reference to the value of the property or the amount paid for it?”
“Some reports suggest that the main residence allowance may be limited in some way, possibly for estates above a certain limit (e.g. £1.5 million) or perhaps where earnings are more than a certain amount (as in the US). This would be a major change to the approach to taxing homes in the UK. Some people are planning to use their home as a pension in order to downsize ‘tax-free’ and possibly pay off existing debts.” It is hoped that some kind of re-taxation will occur here because it will pay. they release equity to fund debt and then their retirement.
“A much simpler and more acceptable option would be to adjust SDLT bands and rates (again!). While no-one wants a rise in tax rates, most people pay SDLT only occasionally and such a change is unlikely to throw a major wrench into carefully considered retirement planning work. The opportunity to pay SDLT in installments may be welcomed by some (whether or not interest accrues on the outstanding tax).”
