The end of the stamp duty land tax (SDLT) holiday on 30 June for the £250,000 to £500,000 price banding caused a substantial rise in the number of transactions completed in June as purchasers tried to complete to avoid paying additional stamp duty
The total SDLT raised over the last quarter hit £2.8bn with transactions buoyant despite a hike in property prices as property sales totalled 198,240 in June 2021 alone, according to the latest HMRC figures. This marks a 219% increase on property sales compared with the midst of the first lockdown last June when property sales went into freefall.
In addition, the Exchequer benefited from a surge in revenue from the 2% surcharge on the purchase of properties by non-residents which was introduced on 1 April. To date this has resulted in 2,700 transactions paying £19m in stamp duty, paid by buyers based overseas.
Residential property transactions in Q2 2021 were 9% higher than in Q1 2021, and 175% higher than in Q2 2020 (the quarter before the SDLT holiday was introduced).
There was also a jump in property sales for second homes and buy to let properties in the latest quarter, from May to July 2021, with liable higher rate transactions, which are subject to a 3% surcharge, increasing by 189% from 29,300 in Q2 2020 to 84,700 in Q2 2021. Compared to Q1 2021 there has been a rise of 30% in transaction value.
In the 2020 Summer Statement, the Chancellor temporarily increased the SDLT nil rate band for residential property purchases from £125,000 to £500,000 from 8 July 2020 to 31 March 2021. During Budget 2021, the temporary increase in the SDLT nil rate band to £500,000 for residential transactions in England and Northern Ireland was extended until 30 June 2021. From 1 July 2021 the nil rate band will reduce to £250,000 until 30 September 2021 before returning to £125,000 from 1 October 2021.
Both March 2021 and June 2021 residential transactions have been impacted by expected forestalling behaviour by taxpayers. In March 2021 taxpayers sought to complete property purchases before the original end date of the SDLT holiday of 31 March 2021.
In addition to this the March 2021 figures may well also include a number of non-resident purchasers of residential properties that completed their transactions before the introduction of the non-residents surcharge on the 1 April 2021. Following the extension of the SDLT holiday after March 2021 there was a significant spike in transactions towards the end of June as taxpayers sought to complete transactions before 30 June 2021.
Chris Etherington, private client tax partner at RSM, said: ‘The Chancellor will be laughing all the way to the bank after seeing the level of tax revenues generated by the stamp duty land tax (SDLT) holiday and the new charges imposed on non-residents buying UK property.
‘Whilst taxpayers may have thought the Chancellor was being generous when he announced the SDLT holiday last year, the real winner has been the government itself.
‘The temporary relief from SDLT on residential property purchases has supercharged the property market with the number of residential property deals in 2021 nearly 50% higher than at the same point in 2019 and 165% higher than at the same point in 2020.
‘Even with lower SDLT rates on transactions, the number of deals completed in 2021 to date and higher property prices has ensured the tax take is higher than pre-pandemic levels.
‘Taxpayers on the other hand have been faced with an artificial spike in property prices, caused by the SDLT holiday, which has wiped out any tax savings they may have received. The latest figures from the Office of Tax Simplification show that average house prices have risen by 10% cent in the last year, meaning many house buyers will have paid far more for the house than any tax saved.
‘The good news keeps coming for the Chancellor with an additional £89m of SDLT revenues received from 2,700 transactions involving non-UK residents buying properties in England and Northern Ireland. However, non-resident buyers who subsequently spend sufficient time in the UK after buying a home here can claim a refund so the Treasury these funds cannot be allocated for spending plans just yet.
‘The Chancellor will be keeping an eye on whether this new SDLT charge deters overseas buyers in the future and could seek to increase the 2% tax rate if it doesn’t.’
