Despite being on the ropes the housing market is preparing to contribute an additional £180m to the Exchequer next year as the VAT increase hikes the Government’s tax take from 4th January and the Labour legacy of increased Stamp Duty Land Tax that will come from 6th April adds yet more.
The £1.5b estate agency industry (sales) will contribute £36m in additional VAT based on the last 12 months transactions. Lettings fees will add a further £28m with £19m more coming from VAT charged on conveyancing and the other costs incurred as people move house. Buyers of £1m+ homes will pay in total an extra £100m as stamp duty paid on the top tranche will rise by 1% to 5%.
The Chancellor is hoping to raise an additional £12b through the 2.5% increase in VAT. Money paid by consumers and businesses as they go about their daily lives.
The Government squeeze on the rich hasn’t stopped at the removal of Child Tax Credits as they stiffen the tax paid by buyers of £1m+ homes next year. Stamp duty is already a significant deterrent for many – particularly at the higher bands and the introduction of the higher 5% tranche in April provides a glimpse of what the LibDems ‘Mansion tax‘ could have looked like. Fees and taxes mean that some people will be paying nearly 10% of the value of their home just to move at a time when many commentators predict property prices will fall by this amount.
Transaction volumes are already worryingly low. People are once again looking at home improvement to try and solve their problems rather than physically moving house. Some are digging basements, others are punching into the roof space or looking at converting outside space.
Looking at the detail of the Land Registry reports each month we can see that across England and Wales in the past year there have been 6,472 homes sold in excess of £1m of which 4,003 were in London. The combined value of these mansions tops £9b and despite the total number of sales falling back to 647,000 house buyers still paid an eye-watering £5b in stamp duty tax.
Stamp Duty Land Tax – HMRC http://www.hmrc.gov.uk/sdlt/intro/rates-thresholds.html