What are the Conservative’s plans for stamp duty?
With a brand-new majority government, the Conservative Party now has the mandate to carry out some sweeping reforms and this could well include an overhaul of stamp duty.
Last summer, Boris Johnson repeatedly spoke about the possibility of reducing the Stamp Duty tax. However, these plans were not a part of the Tory manifesto this autumn, but fiscal experts believe the long-awaited reforms are more likely under this government than at any time. Investors are keen primarily because lowering the costs of transactions will trigger the property market in a highly positive way – something the Tories will be in favour of doing, especially to alleviate the effects of Brexit uncertainty.
The impact of any stamp duty reform would be mainly felt in expensive locations such as London, areas where more property owners were impacted by the amendments introduced nearly six years ago when the tax was last changed.
Who will be affected by the proposed changes to stamp duty?
The most likely change to stamp duty is likely to apply to overseas buyers who will pay a stamp duty surcharge of 3 percent. This is believed to apply to companies and individuals buying properties in England alike. Boris Johnson is reportedly interested in refuting claims that he is the leader of the party of the wealthy and to keep new voters on-side. The money raised from the changes – estimated to be circa £120m will be used to combat the capital’s homelessness crisis.
The Conservative Party claims that the measure – predicted to affect 70,000 transactions annually in England alone – would deter foreign investors buying properties and leaving them empty or as rental properties commanding over inflated prices. Recent research revealed that 13 per cent of new-build London properties were purchased by non-UK residents from 2014 to 2016
The Treasury chief secretary, Rishi Sunak, said he would like Britain to remain open to people arriving to live, work, and settle down “in this great country”. However, the minister added a note of caution, saying that evidence strongly shows that enabling increased demand to housing already in limited supply will inevitably inflate house prices. Introducing a higher rate of stamp duty for foreign buyers will, therefore, help to resolve this issue and could hopefully raise much-needed funds for rough sleepers.
This policy was initially announced by Theresa May in 2018, but following a consultation, is now on the road to being formally adopted.
The surcharge would be imposed in addition to an existing higher rate of stamp duty on buy-to-let and second-home. This was brought in gradations in April 2016: 3 percent for homes worth less than £125,000, 5 percent for homes valued between £125,001 and £250,000, 8 percent for properties deemed to be worth between £250,001 and £925,000, 13 percent for homes up to £1.5 million – and 15 per cent for the tiny percent of properties worth more than that.
These changes mean an international non-UK resident purchasing a property valued more than £1.5m will need to pay a new stamp-duty rate of 18 per cent.
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