New data from HM Revenue and Customs (HMRC) has suggested to Simon Morris that the revenue accrued from Stamp Duty hit record heights during the previous financial year.
Stamp Duty Land Tax is a levy the government applies to a property or land that sells for a certain price in England, Wales or Northern Ireland. I’ve made it clear here on the Simon Morris blog that Stamp Duty has had an effect on London property development. It’s making it harder for home owners in the prime areas of the UK capital to sell their properties. In some cases, owners are even having to offer to pay Stamp Duty to shift otherwise desirable residential units.
We’ve now been provided with some idea of how Stamp Duty is hitting the UK residential property sector. Property Wire reported that new figures from HMRC indicate that Stamp Duty from residential property transactions provided the UK government with £7.5 billion in revenue during 2014/15.
This is a record sum. Stamp Duty from residential property transactions only provided the UK government £6.45 million in revenue in 2013/14. This is despite cuts made to Stamp Duty for homes worth under £1.1 million in December 2014. Explaining these figures, Grainne Gilmore, head of UK residential research at Knight Frank said:
“Overall, home buyers still paid more in stamp duty than over the previous 12 months. While the increased take from stamp duty reflects the growth in house prices and a pick-up in transactions, another factor has been the increases to stamp duty charges, especially towards the top end of the market.”
London hit hard
The data indicates that London, which has more homes worth over £1 million than anywhere else in the UK, was hit particularly hard by Stamp Duty in 2014/15. Residential property transactions in the UK capital supplied the government with just over £3 billion in Stamp Duty. The South East followed at £1.6 billion, and together these two regions account for 66% of Stamp Duty revenue.
Gilmore added: “The relative burden of stamp duty is also highlighted by the data. Londoners paid 43 times more stamp duty than buyers in the North East over the last year, a reflection of the widening of the North/South divide in terms of activity and prices, but also the higher stamp duty charges for more expensive homes.”
All of this data strongly suggests that Stamp Duty is hitting the higher end of the UK’s, especially London’s, property market. This should make all investors stop and think. If you plan to buy a house for under £500,000 in London, how will selling it turn a profit with the burden of Stamp Duty hanging over your head? Only by factoring Stamp Duty into the equation can investors hope to make a profit.