Rumours the Government may seek extra tax revenue from the housing market at the next Budget have been met with concern by FPDSavills.
The property services firm warned that further taxation at a time when the market is cooling could destabilise prices and damage the economy. Fears have centred on a rise in stamp duty and a new levy of capital gains tax on main residences, which are currently exempt.
Richard Donnell, director at FPDSavills Research, said: “The housing market already generates significant sums of tax revenue, and could raise even more. However, if the net result of higher taxes is a further restriction on supply, then this will simply support high house prices and make residential values even more volatile. There seems to be a potential conflict between the need for extra tax revenue and the Government”s desire to see a less volatile housing market.”
Taxation from the housing market last year totalled £4.5bn, which was 3% of total tax revenues. Most of this came from Stamp Duty (77%), with the rest split between Capital Gains (4%) and Inheritance Tax (19%).
However, Andrew Clare, chief economist at Legal & General, said: “The Government is making a lot of money from the housing market, but it will need to boost its finances further with either a higher bond issuance or steeper taxation. I think any shortfall will predominantly be made up of borrowing and not taxation.”
See Mortgage Solutions Bulletin, (10 November) for more information on industry lobbying against further homeowner taxes.