Under the new administration, PM Boris Johnson has said he wants to cut the rate of Stamp Duty while sources close to number 10 say that there is the possibility of the tax being abolished altogether for the purchase of homes valued at less than £500,000.
We previously commented – in our posting dated the 16th of July – on such promises made by the incoming Prime Minister to reverse Stamp Duty increases that came into effect in 2014.
At first sight, any reduction in Stamp Duty is bound to result in a loss of revenue to the Treasury but new research – published by Estate Agent Today on the 5th of August – suggests that the very opposite might be true.
Of course, the removal of Stamp Duty on purchases below £500,000 is going to reduce the tax-take from this source alone. But the removal of the tax on a whole range of purchases is likely to have the effect of encouraging the volume of transactions to increase significantly – the research suggests that this could be an increase of as much as 40%.
Not only does the increase in business provide a boost for the housing market, but it is also likely to generate further revenue for the public purse once receipts such as VAT and the employment and corporation taxes paid by estate agents, conveyancers and removal firms and others are taken into consideration. In other words, there is an effect on tax revenues to be felt more widely than just that of Stamp Duty.
There has also been speculation that the PM may switch the Stamp Duty tax liability from the buyer to the seller.