The Intermediary Mortgage Lenders Association (IMLA) has warned the government against using the property market as a source of new tax revenue in next month’s Budget, arguing that such measures would do little to address the Treasury’s fiscal gap while risking wider economic damage.
The Treasury is reported to be facing a shortfall of between £20 billion and £40 billion ahead of the 26 November Budget.
However, IMLA’s latest analysis suggests that all of the housing-related tax options reportedly under consideration – including a new annual property tax, reform of council tax, and capital gains tax on main residences – would raise less than £6 billion in total.
The trade body said the numbers underscored the limited fiscal impact of targeting homeowners and landlords, while the potential consequences for market confidence and transaction volumes could be severe.
DANGER OF SUPRESSING DEMAND
Property activity, it says, underpins large parts of the UK economy, from construction and conveyancing to retail and home improvement.
With the housing sector already subdued, IMLA warned that additional tax burdens could suppress demand, reduce mobility and further constrain the supply of rental housing, resulting in higher rents and slower growth.
It is instead calling on the Chancellor to focus on policies that encourage housing investment and private finance to support new supply, arguing that stimulating transactions would deliver stronger returns for the wider economy.
NUMBERS DON’T MOVE THE DIAL
Kate Davies (main picrture, inset), executive director of IMLA, says: “These numbers simply don’t move the dial.
“The Chancellor should resist the temptation to reach for politically easy but economically damaging options. Most of the property-related measures being discussed would deliver minimal revenue, take years to implement and undermine confidence in the housing market.”
“Tinkering with the housing market will not deliver what the government needs.”
Davies adds that “tinkering with the housing market will not deliver what the government needs,” urging ministers to prioritise “broader, bolder measures” that can raise revenue and support investment.
And she says: “Boosting housing activity is one of the fastest and most effective ways to stimulate wider growth. Dampening it will have the opposite effect. The inevitable result of squeezing landlords and homeowners further will be fewer rental homes, higher rents and more misery for renters.”
IMLA is pressing for a clear and consistent long-term housing strategy to underpin market confidence and avoid the uncertainty caused by short-term, politically motivated tax interventions.
Davies adds: “The market will respond far better to clarity and conviction than to dithering and indecision.”
