A TAXING TIME FOR THE PROPERTY MARKET

With our public finances in such a parlous state, it is hardly surprising that taxation was the focus of many speeches during the party conference season; and property taxation in particular seemed to be in the spotlight, writes Clive Hedges.

Kemi Badenoch’s keynote announcement that a future Conservative government would abolish stamp duty was only the latest in a long line of announcements, leaks and speculation about how property might be more effectively and more fairly taxed in the future.

Last year, stamp duty land tax brought in £15.36 billion to the Exchequer, while council tax raised a whopping £100 billion.  No matter how politicians – from any party – try to sweeten the pill, these are figures which cannot be ignored.  These two taxes alone pay half the entire NHS budget.

The concerning thing is that uncertainty about property taxation is having a very real negative effect on the market.  We are seeing many chains stalled, while buyers ‘wait and see’ what is announced in the Chancellor’s Budget on 26^th November.  The numerous leaks emanating from Whitehall and from politicians are not helping this situation.

It is possible that Mrs Reeves will announce a review of how property taxation works.  Some view stamp duty as a tax on mobility, paid only by those who need to move house (to move jobs, for example, or because they are starting a family), and avoided by those who can stay put and not move.

But any such review is likely to be for the long term.  Significant change will require a lengthy period of consultation, followed by primary legislation and significant scrutiny to ensure that any new system works.  Reform will be measured in years, not weeks or months, and so will be irrelevant to anyone wanting to move in the near future.

The only way the Chancellor could tinker with property taxation in the short term would be once again to fiddle with stamp duty, and given that she did this last year, this seems unlikely.  More grandiose policy suggestions, such as an annual land tax, charging capital gains tax on primary residences over a certain value (almost certainly politically impossible) or overhauling council tax are unlikely to see the light of day this decade.

Even the suggestion – much leaked – that the seller rather than the buyer should be responsible for any transaction tax will make little difference.  It will still have to be paid, and any change will simply be reflected in the price of the property.  It certainly won’t make any difference to affordability.

There is a fair argument that government should be looking to see whether the current system of taxing property is fit for purpose.  But that shouldn’t deter people looking to move now from doing so; waiting until after the Budget is simply injecting unnecessary delay – for no benefit – into the system.