Statistics released by HMRC show that the month of April provided the Government with the highest Stamp Duty Land Tax ("SDLT") revenue ever recorded for a single month.
The government generated nearly £1.2 billion of SDLT in April from a total of 173,430 property transactions in March.
“It was inevitable that April would be a bumper month for SDLT revenue as buy-to-let investors scrambled to beat the new additional 3% SDLT surcharge. Changes in the tax system lead to behavioural change, and the advance warning by the government that SDLT would increase for second purchases from 1 April 2016, is certainly evidence of opportunistic buyers wanting to beat the tax rise,” commented Nimesh Shah, partner.
Paul Haywood-Schiefer, assistant manager, explained the circumstances leading to the spike in revenue: “In his Autumn Statement last November, the Chancellor announced that from 1 April 2016 there would be an additional 3% SDLT charge for anyone purchasing a second (or additional) residential property. What we have seen in the latest statistics shows there has been a huge rush to beat this deadline; in fact, a stark indication of this is that the residential property transactions for the month of April itself have dropped to a three-year low.”
In fact, there was a drop of more than 100,000 residential property transactions in April (70,690) from March’s bumper figures (173,430). This is the lowest number of residential property transactions since February 2013 and the lowest recorded transactions for the month of April since April 2012.
Paul commented: “With the rush to get these transactions completed in April, it is inevitable there will be a slowdown in the market in the months ahead. Following this major upheaval in the tax, it will be interesting to see how property transactions and SDLT receipts fare over the next few months as the housing market relaxes itself. Those looking to purchase an additional property will be contemplating the increased SDLT costs, while those with two properties may not want to sell, knowing they will have additional SDLT to fund on replacing the second property.”
He added: “For now, the overall effect on the Treasury is positive, as SDLT receipts for the previous 12 months (£11 billion) have totalled almost as much as Capital Gains Tax and Inheritance Tax put together (£11.7 billion), and further demonstrates how the tax on property has boosted the Treasury revenues. It has also addressed an area in which the government had expected to lose out.”
Nimesh concluded: “Despite the change in the way SDLT was calculated in December 2014, which meant that most property purchases (those below £937,500) would result in less SDLT, the tax revenue is now £400 million up on the previous 12 months. The Treasury predicted the new SDLT system would cost them £760 million in 2015/16, but the announcement of the additional 3% SDLT has dramatically reversed that projection in the Government’s favour.”
For more information, please contact Nimesh Shah at firstname.lastname@example.org