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Now that Boris Johnson is the new prime minister, we might be seeing his proposed plans for Stamp Duty Land Tax take effect. SDLT is riddled with complex rules, exemptions, surcharges, and idiosyncrasies. Could the PM’s suggested changes help simplify this tax?
What will change?
The most impactful change is the PM’s recommendation to make property sellers, rather than the buyers, responsible for paying stamp duty on primary residences only.
Further changes include eradicating the tax for all homes under £500,000 and reducing the higher rate threshold back from 12% to 7%.
This means that there will be no need for the First Time Buyers Relief currently in place.
The Association of Accounting Technicians (AAT) suggests that these amendments will help save the taxpayer £700m a year while protecting the £9bn of revenue SDLT produces at present.
These changes obviously work out in a buyer’s favour as the chances they’ll have to pay the secondary residence surcharge in the event they haven’t sold their previous home decreases. Plus, the tax is paid on the lower-priced home that’s being sold as opposed to the higher-priced home they’re most likely moving to.
What stays the same?
Abolishing stamp duty for buyers would only apply to primary residences, so the surcharges for purchasing additional residential and buy-to-let properties would still apply.
Likewise, the buyer would still be responsible for the supplementary charge when an overseas property investor is involved in the transaction.
The pros
Shifting stamp duty responsibility from buyer to seller could actually be highly beneficial for property investors, allowing them to expand their portfolio. This will have a domino effect on the market as more properties will be available to rent, and rent prices will stabilise with more competition. This allows tenants to save up and actually get onto the property ladder as first time buyers.
Similarly, in the residential sector, the changes would increase the number of house purchases by minimising upfront costs for all home buyers (down-sizers excluded) freeing up the more affordable properties popular with first-time buyers.
And the draw backs?
Of course, knowing that they’ll bear the brunt of SDLT, sellers may start incorporating the expense into their asking price of the property, which might backfire because the higher the asking price, the more stamp duty they’ll owe.
And of course, a higher asking price makes the property less attractive and homeowners might run into trouble selling their homes.
Concerned about the possible impact on you or your investment portfolio? Get in touch with one of our team members to discuss how to deal with the proposed changes.