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Current stamp duty system ‘not working’, brokers say

  • 01/08/2019
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Current stamp duty system ‘not working’, brokers say
Brokers have suggested that the current Stamp Duty system is “not working” and preventing smaller landlords from investing to grow their portfolios, following the latest quarterly statistics.


According to HMRC, stamp duty receipts have seen an overall one per cent dip in Q2 2019 compared to Q1, dragged down by a 19 per cent decline in non-residential receipts despite an eight per cent increase in residential receipts.  

Residential transactions increased by seven per cent to 240,300 during the quarter and in the previous year there was an increase of five per cent. Residential transactions were three per cent lower than in Q2 2018.  

Liable residential transactions rose by seven per cent to 156,400 and over the same period last year the rise was four per cent. Non-liable residential transactions rose by six per cent to 83,900 this quarter compared to a five per cent increase over the same period last year. 

Overall, transactions increased by six per cent from 253,900 in Q1 2019 to 267,900 in Q2 2019. However, 52,600 transactions claimed first-time buyers’ relief making a total of 340,900 claims since the relief’s introduction. The estimated total amount relieved over that period is £804m. 

Furthermore, in Q2 2019, only 65 per cent of residential transactions were liable for Stamp Duty Land Tax; the joint lowest (with Q1 2019) proportion since Q2 2013.


Stamp duty a ‘major barrier’

Kate Davies, executive director of the Intermediary Mortgage Lenders Association, said although the government had taken steps to limit the impact of stamp duty on first-time buyers, it still remained a “major barrier” for older homeowners who wanted to downsize.  

She said: “There is a whole generation of asset-rich but cash poor people approaching retirement. Downsizing is a great way for many of them to free up cash for later life.

“Removing stamp duty for these so-called last-time buyers would help those who want to downsize to move into smaller, more manageable properties for retirement. It would also increase the availability of larger houses suitable for growing families and ease the movement in our housing market.”

She added: “Private landlords across the UK are under significant pressure from a layering of tax changes that includes the additional three per cent stamp duty surcharge on second homes. As these figures show, this levy continues to deter many buyers from entering this market and prevents small-scale landlords from investing to grow their portfolios.”

Davies went on to say it was “critical” that the government “put the brakes” on any further legislation that could restrict the private rental sector (PRS). “There are unintended consequences of squeezing the PRS in order to boost homeownership, not least driving up rents and limiting the choice for tenants across the country.” 


Effect of tinkering

Jonathan Harris, director of mortgage broker Anderson Harris, added that residential stamp duty transactions seeing an increase from Q1 to Q2 proved it was an “important source of revenue” for the government, but insisted the current system was not working. 

He also said older borrowers were “discouraged” to downsize due to the tax. “By removing stamp duty for downsizers, it would free up family homes and encourage movement across the housing market, which is far healthier than the stagnation we have at the moment.

“More transactions would benefit countless people working across many industries, not just brokers.

Martijn van der Heijden, chief strategy officer at Habito, noted that the latest statistics highlighted the enormous impact stamp duty policy had on housing transactions.

“We see that First Time Buyer Relief continues to have a positive and material effect, but also see that the overall effect of all the tinkering, banding and net increase of the level of stamp duty means transactions continue to slope down since the main changes were introduced in December 2014,” he said.

“Transactions for instance have been down compared to 2014’s second quarter for five years in a row now.” 

Van der Heijden went on to say housing policy should focus on allowing people to live where they wanted, close to where they worked and “in the building that’s right for them and their family.” 

He concluded: “We know there is an increased focus from the new prime minister following commitments he made in his leadership campaign on stamp duty and how we can support those looking to either get onto the housing ladder or move home.

“These figures suggest any move to remove or reduce the distortion that stamp duty brings to the market will have material impact on transaction volumes and an efficient market.”


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