The latest data from HM Revenue & Customs (HMRC) shows that the number of UK property sales is down, but Stamp Duty receipts are still rising, with a £1.3 billion increase, taking the total receipt to just over £13 billion in the past 12 months, reports leading accounting, tax and advisory firm Blick Rothenberg.
Paul Haywood-Schiefer, an Assistant Manager at Blick Rothenberg, explains: “The number of property transactions in the UK has declined, with 0.33%, or 4,010, fewer transactions taking place in the last 12 months, and with a decrease of 2.28%, or 28,580, over the last two years.
“However, Stamp Duty receipts are still rising, with a £1.3 billion (11.55%) increase in the last 12 months. Much of that increase can be put down to the 3% surcharge on second and additional property purchases.”
He continues: “Last January and February’s figures were inevitably bolstered by the surge of property transactions occurring in March 2016, when buyers were rushing to purchase second properties before the introduction of the additional 3% Stamp Duty charge for second and additional properties.
“The first time buyer relief for those buying properties under £500,000 announced in the Autumn Budget 2017 is starting to show its first signs that some of the year-on-year receipts are going to be lower, and we would expect to see this have a further impact on the receipts in the coming months.”
Frank Nash, a Partner at the firm, adds: “Stamp Duty is a major hurdle for homebuyers, but seemingly not so for investors. An additional 3% added to the purchase of a buy-to-let property is peanuts when spread over the life of the investment. Investors will be cautious around rising interest rates and reduced margins, but Stamp Duty is not itself a deterrent for investing.”
On the Capital Gains Tax (CGT) front, HMRC has been collecting less, with an 8% (£670m) decrease in the last 12 months, and a 9.1% (just under £700m) fall in the combined figures for January and February 2018, compared to the same months in 2017. These are the months when most CGT is collected, due to most of it being paid through self-assessment Income Tax returns.
However, the 8% reduction of the main rate of CGT to 20%, except on property and carried interest, from April 2016, has inevitably led to this 8% decline in receipts.
Nevertheless, Nash points out: “However, the Government has taken action to bring more into the CGT net by introducing CGT for non-UK residents owning UK residential properties, but, due to the nature of the measures and UK property market prices remaining fairly static, it will be some time before the fruits of this change show through in the tax receipts.”
The latest self-assessment Income Tax receipts figures appear static, with just a 0.6% increase in the past 12 months. This is just over 3% lower growth than can be seen in the PAYE receipts growth in the same period. In fact, self-assessment Income Tax receipts are contributing just £28.5 billion of the £180 billion total Income Tax receipts – a mere 15.8% of the total.
Haywood-Schiefer concludes: “The likely explanation for this is that the less favourable dividend rates of tax, beginning from April 2016, may have prompted business owners to accelerate dividends prior to this date, and so it was inevitable that there would be a slowdown on growth, which, in the 12 months from March 2015 to February 2016, was 14%.
“Increases in the personal allowance and the starting rate for savings are also taking some people out of self-assessment altogether, although these would have a lesser impact on the receipts.”
Landlords, we remind you to get your taxes in order, especially ahead of the second phase of the Government’s reduction in mortgage interest tax relief for buy-to-let investors in April.