The Negotiator magazine are reporting that the Treasury came very close to raising the Stamp Duty surcharge from 3% to 4%, but this was rejected at the last meoment.
The article can be seen here, and says:
A 1% rise in Stamp Duty for landlords was on the cards but rejected at the last minute by Chancellor Rishi Sunak, according to Office for Budget Responsibility (OBR) documents.
The hike in ‘additional property’ Stamp Duty for landlords and second home owners was clearly being discussed at Treasury level, as the OBR’s Economic and Fiscal Outlook report, published to coincide with yesterday’s Budget, said: “A 3% surcharge on additional property purchases (second homes and buy-to-let properties) was introduced in April 2016. It has been raised to 4% in this Budget.
HMRC has analysed the response to its introduction and found that it was strong.”
The OBR mentions the Laffer curve – a theoretical relationship between rates of taxation and the resulting levels of the government’s tax revenue, which explains that increasing tax rates beyond a certain point is counter-productive for raising further tax revenue; in this case, raise them too high and people would start avoiding paying the tax by not selling property.
SOUNDS LIKE LAFFER
It adds that Capital Gains Tax is another tax that is arguably close to the peak of its Laffer curve, once the consequences of behavioural responses to rate changes for Stamp Duty receipts, in particular, are factored in.
“Like Stamp Duty and dividends tax, it is also prone to time-related behavioural responses, such as the ‘forestalling’ (bringing forward) or ‘stalling’ (delaying) of activities in response to pre-announced tax changes.”
Some housing analysts have predicted the Stamp Duty rise could be announced at a later date in a bid to support first-time buyers, particularly after landlords were included in this year’s Stamp Duty holiday.
Labour have said that the holiday led to a bonanza for buy-to-let landlords at the expense of first-time buyers; their research found that the number of buy-to-let mortgages actually tripled after the Chancellor announced the Stamp Duty Land Tax temporary reduction in his 2020 budget, a zero rate that would be increased from £125,000 to £500,000.