The Chancellor’s decision to set the autumn Budget for 26 November has intensified speculation over sweeping property tax reforms with warnings that the uncertainty could stall housing transactions and destabilise the market.
Reports suggest the Treasury is considering three major changes: scrapping stamp duty for buyers in favour of a new levy on sellers of homes worth more than £500,000.
And it could be considering ending the Capital Gains Tax exemption on higher-value main residences and extending National Insurance contributions to rental income.
Analysts say the mooted reforms would have wide-ranging implications.
HIGHLY DISRUPTIVE
A seller’s levy could distort pricing, with properties clustered just below the £500,000 threshold or inflated to offset new costs.
A change to Capital Gains Tax could discourage downsizers from selling, locking up larger family homes and tightening supply further.
Extending National Insurance to landlords’ rental income would be another blow to the private rented sector. While aimed at property investors, the measure could see higher costs passed on to tenants already facing record rents.
Jonathan Stinton, Head of Mortgage Relations at Coventry Building Society, reckons that the next 10 weeks could prove highly disruptive as buyers and sellers hold back in anticipation of potential savings or liabilities.
He says: “This isn’t a problem for sales going through right now. But as we get closer to 26th November, how many buyers are going to be tempted to drag their feet just in case stamp duty is abolished and they save thousands of pounds overnight?
“That could add weeks onto transactions and put sales chains at risk. Sellers, particularly those with more expensive homes, may also rush to complete before they find themselves on the sharp end of a rumoured new property tax.”
FRUSTRATING TIME
And he adds: “Until these rumours are either quashed or implemented, it’s going to be a frustrating time for people who just want to move home.
“Ten weeks is a long time to wait to find out if these changes are real. The Treasury can’t expect anyone to carry on as usual when thousands of pounds could be at stake. What the housing market needs most right now is clarity.
“When tax reforms of this scale come in, there are always winners and losers. Drip-feeding policy ideas months ahead of time is unhelpful for everyone. Treasury should either quash the rumours or set out the detail, so buyers, sellers and the market know what to prepare for.”
ADDING TO UNCERTAINTY
Nigel Bishop of buying agency Recoco Property Search says: “The Autumn Budget is taking place a month later than expected, which only adds to the already existing uncertainty felt by buyers and sellers.
“The property market has been subjected to an abundance of new regulations and tax threats this year which has achieved the exact opposite of what the government has promised.
“With the current administration having also failed to achieve the 2% inflation target, which currently stands at 3.8%, some house hunters just don’t feel that the economy is stable enough to make major financial decisions whilst sellers are struggling to achieve their asking prices.”
PURE SPECULATION
And he adds: “Although any reform to current property taxes is pure speculation, it is enough to bring the current property market to a nearby standstill.
“The only buyers wanting to move forward with their property purchase at the moment are those who, due to personal circumstances, need to move sooner rather than later. Their budgets often exceed the £1m mark and they tend to find a property within their budget as there are currently more homes for sale.”
