The government saw £470m decline in stamp duty yields in May as residential property transactions dropped by 49.6% year-on-year.
Ministers have been called on to consider a stamp duty holiday which experts hope will bolster confidence in the housing market. However, the government has not made any announcements about changes the much-derided tax.
David Hannah, principal consultant at Cornerstone Tax, has warned that the government is unable to afford such a hit to its coffers.
He said: “Whilst the property market has seen a slight increase in activity in May compared to April, it is still shocking to see that residential transactions are 49.6% lower than this time last year.
“This means a significant £470m reduction in stamp duty yields for the Treasury compared to May 2019. At a time of unprecedented government borrowing, this is bad news for the country’s finances.
“There is talk about whether the government should introduce a stamp duty holiday to reinvigorate the market – but the government simply cannot afford this.
“If the government wants to boost activity in the housing market and provide much needed affordable rental homes – it should exempt landlords from the 3% stamp duty surcharge for a set period.
“This can easily be reviewed in 12 months when, hopefully, the economy is on the road to recovery and will provide important immediate relief to the rental market which is likely to grow after the pandemic because of financial hardship and increased family breakdown.
“However much HMRC may want to increase its yields, households must make sure they are not accidently overpaying their stamp duty.
“This keeps on happening, but the message is slowly getting out there. So far this year, we have seen a 300% increase in people coming to tax specialists like Cornerstone to re-evaluate their stamp duty bill and secure a refund. This is not reported in the statistics, so the net yield is actually even lower.”