UK Chancellor Announces Stamp Duty Land Tax Changes

by Jason Gorringe, Tax-News.com, London

03 September 2008

In an attempt to bolster the ailing housing market, UK Chancellor of the Exchequer, Alistair Darling announced on Tuesday that the stamp duty land tax threshold would be increased for purchases of residential property.

The relief will apply to transactions with an effective date on or after September 3, 2008, and before September 3, 2009.

It will provide an exemption from stamp duty land tax for land transactions consisting entirely of residential property where the chargeable consideration is not more than GBP175,000.

The announcement of the stamp duty land tax break has been broadly welcomed, as speculation in recent months with regard to the nature of assistance likely to be provided to home buyers had further slowed property sales.

Commenting on the temporary raising of the stamp duty threshold on house purchases from GBP125,000 to GBP175,000, Leonie Kerswill, tax partner at PricewaterhouseCoopers LLP observed on Tuesday that:

“This is wonderful news for those struggling to get on the housing ladder not least because it will bring to an end the speculation of ‘what might be’ that has affected activity levels in the residential property market."

“However, the nature of stamp duty means that this doesn't help those buying more expensive properties. For those living in areas with high property prices such as London, with the average house prices well over the GBP175,000 bracket, buyers will still have to find the stamp duty - more usually at 3% or 4% - on the whole purchase price."

She continued: “The key date for SDLT is completion, so this will be an unexpected bonus for those buyers who have already exchanged but who won't complete until after today. Where the purchase price is more than GBP175,000 SDLT at 1% will apply to the whole amount, so we can probably expect some last minute renegotiations of price."

John Hawksworth, head of macroeconomics at PricewaterhouseCoopers LLP, suggested, however, that the impact of the measure on the UK housing market was likely to be far from spectacular, arguing that:

"This measure will provide some support for the lower end of the housing market, but with mortgage lending still very constrained and confidence low, it is unlikely to be enough to prevent further significant falls in average UK house prices over the next 6-12 months."

Jonathan Hook, construction and housebuilding leader at PricewaterhouseCoopers LLP concurred, stating that:

“Whilst any measure that gets the first time buyer housing market moving again is welcome, I suspect that the current lack of availability of mortgage finance and people's general concerns about the direction of the economy will outweigh the benefits of a one year measure such as this.”

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