An extension of the Stamp Duty Land Tax (SDLT) threshold after 31st March 2021, rather than returning to the £125,000 threshold, could generate higher consumption. This has the potential of increasing housing market activity, which subsequently could provide a fiscal surplus of £139 million per year.
Research suggests that maintaining the current SDLT holiday threshold of £500,000 (increased from £125,000 under the SDLT holiday until 31st March 2021) would provide new tax revenues of between £2.3 and £4.1 billion. However, increasing the threshold on a permanent basis to a lower amount of £450,000 from 31st March 2021, could see the net increase in tax revenues rise to £247 million, whilst a threshold of £300,000 could lead to a surplus of £491 million per year.
A new SDLT threshold could lead to an estimated 37,000 additional property sales each year, resulting in £266 million in annual revenues. Future property values could rise, which combined with increased transaction numbers, could generate £523 million in annual revenues. The increase in house prices would lead to an increase in household’s collective net wealth up to £113 billion, driving household consumption up by an estimated 0.36% – 0.75%.
According to HMRC, the value of property transactions where the seller was liable to pay Capital Gains Tax was £26.6 billion between 2017/18. Aggregate property wealth increased by 1.9% which could indicate that property transactions, which are liable to Capital Gains Tax, could rise by approximately £505 million each year.
The full report can be found here.