‘Pressure now on’ UK government to follow Welsh lead

The UK government may follow the Welsh lead on stamp duty and introduce a new tax hike on second homes, according to a leading tax expert.

Many agents would like to see the government aim to stimulate housing market activity next year by abolishing the 3% stamp duty surcharge for buy-to-let landlords buying additional properties in England, but that is unlikely to happen.

Sean Randall

In fact, following the Welsh government’s decision yesterday to increase land transaction tax – the Welsh version of stamp duty – the UK government may now follow suit by announcing a similar increase for homes in England.

Sean Randall, a partner at tax and advisory firm Blick Rothenberg, said: “Pressure will now be on the UK government to pass similar measures.”

Randall described measures announced by the Welsh government in relation to the land transaction tax, which takes effect from today, as a “proportionate response to the effect of the pandemic in Wales”.

The changes in Wales include a 1% increase in the surcharge for purchases of “additional” dwellings by individuals and purchases of dwellings by companies, from 3% to 4%. The surcharge is currently 3% in England and Northern Ireland and already 4% in Scotland.

In addition, there is a 50% increase in the nil-rate band for non-residential (or mixed) transactions from £0-£150,000 to £0-£225,000.

Randall said: “The extra revenue produced by the higher surcharge, estimated at £13m, will be invested in social housing.

“The increased nil-rate band for non-residential [and mixed] transactions is designed to help businesses recover from the coronavirus pandemic.”

“The Welsh government also announced that the stamp duty holiday will not be extended in Wales. It will end, as planned, for completions on or after 1 April 2021.”

Following the news that the stamp duty surcharge for second homes is to be increased in Wales, Richard Pike, Phoebus Software sales and marketing director, agrees that the draft Welsh budget announced yesterday will no doubt have the market looking to the UK government for an idea on what may happen when the SDLT holiday period finishes.

He said: “There are two questions that need to be answered. Firstly, what happens to any mortgages that are in the pipeline on 31st March? Secondly, with the country still paying the price of Covid-19 and the uncertainty that it has caused to personal finances, can the government actually afford to go ahead with the deadline?

“There is an argument that asks whether, while the market is moving and putting back into the economy, can they take the risk that end of the holiday won’t put the brakes on again?

“The murmurings are that there will be no extension, but perhaps an increase in second home surcharges and an increase for high value properties may be the better option?”

 

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3 Comments

  1. AlwaysAnAgent

    Pressure from where exactly? I’m sure the Government has bigger things to worry about today.

    I seriously doubt the U.K. Government will feel as if they have to follow the Welsh Government’s decision to slow their housing market down. There isn’t any pressure at all.

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  2. Richard Copus

    I’ve always argued that there is a case for a tax on second homes which are not bona fide buy to lets and the 3% in England has discouraged more than a few second home buyers in the south-west country.  However, Wales’s punitive regime only serves to illustrate how insular Wales and Scotland are now becoming – which is saying something given England’s perspective at the moment – and will not serve anybody any good.

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    1. catdog

      Its a political win though to attack BTL landlords.  The number of times I see in my town about plans for new houses and people saying they need to be affordable housing for local people not houses to be bought up by landlords and rented out.  It is those same people then often even in the same thread that complain rents in the town are too high…    People don’t see the link between extra costs to landlords and higher rents.

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