Treasury set to receive over £8bn in stamp duty this year

Jessica Nangle

February 22, 2021

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Analysis from Coventry Building Society has indicated that the Treasury is on course to receive between £8bn and £8.4bn in stamp duty this year, despite the stamp duty holiday being in force since July 2020.

In the 2019-20 tax year, receipts totalled £11.6bn, suggesting there is likely to be a 28% to 31% shortfall this tax year.

The latest data from HMRC shows stamp duty receipts hit £6.7bn by the end of January, taking the last four months’ receipts up to more than 82% of normal levels.

This could indicate only small changes may be needed in the Budget to get tax revenue from stamp duty back on track, according to The Coventry.

Jonathan Stinton, head of intermediary relationships at Coventry Building Society, said: “There’s no doubt that the stamp duty holiday helped to stimulate the housing market.

“But while there’s a need to fill a large hole in the public finances, there’s clearly room for some creativity – Rishi Sunak may not have to revert back to last year’s rates to achieve more normal levels of receipts.

“Stamp duty is a real barrier to people moving home. Reducing the cost of moving stimulates growth as buyers make their new property their home, generating work for tradespeople and more VAT revenue for Rishi.

“It supports people changing location for work and makes the housing market more efficient by encouraging downsizing, freeing up larger family homes for the next generation.

“The sweet spot for buyers and the taxman could be a smaller reduction in the stamp duty threshold, rather than back to the previous level of £125,000. Or a lower rate of tax for homes costing less than £500,000 would replace lost revenue without unsettling the market.

“Tapering the existing Stamp Duty holiday from April is a sensible position to start with. But a short extension for sales that are yet to complete could create problems. What we don’t want to see is people missing the deadline and a knock-on effect on house moving chains.”

James Tucker, chief executive at Twenty7Tec, spoke of a potential extension to the stamp duty holiday as the Budget approaches.

Tucker said: “Only the Chancellor and his team know if they are going to extend and only they have access to the full modelling that enables him to make that decision.

“However, Rishi is in a bind here: does he stick with a plan that has clearly kept the housing market busy but at the cost of tax revenues?

“My sense is that he’s going to receive criticism no matter what he decides.

“Either he’ll be rewarding people who didn’t hit the mid December offer deadline which would normally see them home by end of March.

“But equally, there will be lots of house buyers who would have been advised in December that they had already missed the effective deadline and it would now be too late for them to revive those plans and hit the new deadline now.

“If you made an offer today it might, just about hit the extended deadline. Given the budget isn’t for a few days yet, it may well be a moot point, especially for first time buyers, who won’t be able to complete within 12 weeks due to current lead times.”

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