Accountancy firm Andersen has expressed concern that Chancellor Gordon Brown may increase Stamp Duty in the pre-Budget report on 27 November.
According to Andersen, if projected tax revenues look likely to fall below target, Stamp Duty could be increased from 4% to 5% on properties priced over £500,000 ‘ a move which would bring UK rates more in line with those charged in Europe.
Andersen said the Government may need to increase tax revenue as contingency reserves are likely to be swallowed up by ongoing anti-terrorist activity and the foot and mouth crisis. If this is the case, Stamp Duty could be one of the first areas to be hit.
Patrick Cannon, a tax partner at Andersen, said raising stamp duty is an effective method of increasing tax revenues. ‘It is relatively easy to raise the Stamp Duty rate as it will not impact on the majority of voters, nor does it break a manifesto commitment. Stamp Duty is also a steady earner for the Government which brings in more than Inheritance Tax and Capital Gains Tax combined every year.’
David Melhuish, policy officer at the Royal Institute of Chartered Surveyors (RICs), said Stamp Duty has already been increased four times since 1997 and another increase could have a significant impact on the commercial property market.
Melhuish said: ‘The economy is already in a down turn and demand for commercial property is slackening, so an increase in taxes will only have a negative impact on the market and further undermine economic activity. Property is taxed enough as it is, so we hope the Government will not focus on this area.’
The residential market would not be immune to a hike either, according to Cannon. ‘London house prices are already beginning to fall and a hike in Stamp Duty will only exacerbate this process. It will mean on a £1m property, buyers will have to pay £50,000 in tax.’
However, Stuart Robinson, a director at Savills Private Finance, said a hike was unlikely. He said: ‘I would be surprised if there was a change. The market is not in a bad state at the moment, there is a fine line between okay and poor, but the Chancellor will be well aware of this.’