George Osborne’s overhaul of the stamp duty tax regime has cost the taxpayer well over half a billion pounds in lost revenue last year, new research today reveals, as sales of high-end homes slowed and investors switched tactics to avoid paying huge premiums on purchases.
In December 2014 the chancellor scrapped the old system, where the amount of stamp duty owed jumped at each threshold, and replaced it with a new gradual rate which resulted in a lower levy for all but the most expensive homes.
But these reforms have come at a cost of £662m to HM Revenue & Customs as buyers avoid paying the higher 12 per cent tax rate on £1.5m-plus homes, according to research conducted by Chestertons.
Nick Barnes, head of research at the estate agency, said: "If we’re judging the Chancellor’s changes to stamp duty in purely fiscal terms, it looks like a disaster that has cost well over half a billion pounds in a single year. The change to stamp duty has had a huge impact on houses valued between £1.5m and £5m, and this has had knock-on effects across the entire market, especially in London.”
Guy Gittins, an executive director at the firm said buyer habits have changed significantly over the last year as a result, with many of those looking to move up the ladder into somewhere bigger not prepared to do so if it means paying a six-figure tax bill.
Research by Knight Frank last week showed a surge in rental deals of super-prime homes last year due to would-be homebuyers putting off plans to purchase a property.
“The recipients of City bonuses who traditionally invest in prime properties have been biding their time or looking elsewhere for better value; and overseas buyers are also changing tactics to side-step this heavy increase in property taxes,” he said.
And although the prospect of an additional three per cent of stamp duty on all second home purchases is creating a recent spike in activity, Gittins said it remains to be seen whether this will continue once the higher rate is brought in on 1 April.