Apropos: The Chancellor’s SDLT reduction is a potential future tax trap

The Chancellor’s current Stamp Duty Land Tax (SDLT) is a potential future tax trap for buyers according to property management firm Apropos. 

David Alexander, joint managing director of apropos

The firm believes that whilst welcoming the increased threshold of SDLT to £500,000 to kickstart the housing market after lockdown, the current review of the capital gains tax (CGT) treatment of property has the potential to financially hit these buyers in the future. Given that this CGT review is so broad it could impact upon individual house buyers, landlords, second homeowners, and investors there are serious concerns that people buying property now could later regret it if the government substantially increased the tax rate.

David Alexander, joint managing director of apropos, commented: “No-one would deny that raising the SDLT threshold (and the consequent increase in the threshold for the land and buildings transaction tax (LBTT) in Scotland) has had the desired effect of accelerating the volume of property purchases at a time when the market was expected to falter.”

“The Chancellor should be credited with ensuring that the property sector has come out of lockdown fully functioning and, dare I say it, almost thriving. This is terrific news, but the concern is if the current CGT review is being used as a means of recovering many of the gains made in these present purchases through a greater CGT take in the future.

“With an enormous deficit to cover the Chancellor may be giving SDLT savings with one hand only to take these gains away through increased CGT later. The temptation is to see the SDLT giveaway as a means of drawing more people into the market and then taking more back through CGT when the property is sold. This could be an extremely clever means of increasing the tax take for the Treasury for decades to come.”

Mr Alexander added: “The CGT review is broad based and is examining everything from main residence homes to landlords and property investors. However, targeting homeowners would be politically difficult and controversial so may not occur but there is every chance that the real long-term target are landlords, investors and second homeowners.

“While the cut to SDLT and LBTT has given renewed vigour to a market that feared a decline there needs to be clarity when the CGT review concludes in October that there will not be a tax grab on these latest purchases. The property market needs stability and, while clearly the costs of the coronavirus pandemic need to be paid for, there should be an equitable distribution of increased taxes rather than viewing property owners as a cash cow now and in the future.

“The financial stability of the property market is an essential component of the UK economy and drastic measures to extract some of the value contained in this market could prove disastrous in the long term. So, while it may be tempting to tax homeowners, landlords and investors it may also cause serious problems for the property market in the future.”

Tags: Apropos

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