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Categorized | Property

Stamp duty receipts top pre-crisis high

Posted on September 30, 2015

The amount of stamp duty raised from British home sales has hit its highest level since the financial crisis — but is set to fall next year.

The government raised £7.5bn from the tax in 2014/15, according to figures released on Wednesday, topping the previous record of £6.7bn in 2007/08.

    This is widely expected to be the high point for the tax take. A government reform last December has exacerbated the slowdown at the top end of the London housing market, which generates more than one pound in every five raised by stamp duty.

    The reform, which replaced the previous slab structure with a sliding scale, means that purchasers of properties below £1m pay less tax than previously — but those buying more expensive homes now pay considerably more.

    Chancellor George Osborne in last year’s Autumn Statement said the move would tackle “a badly designed tax on aspiration”.

    In response, the Office for Budget Responsibility reduced the amount it expected the government to make from the tax by £1.7bn in 2015/16 and £2bn by 2016/17 — 17 per cent of the forecast total receipts in that year.

    Britain’s property market boom pushed sales of the most expensive homes to a record level last year. Some 19,000 properties worth more than £1m were sold in 2014 — up from 15,000 the previous year and for the first time topping the 16,000 level reached in 2007.

    But house prices in London’s most expensive areas have begun to fall for the first time since the financial crisis, as the tax rise curbs demand and triggers fears that the capital’s luxury market has peaked.

    Prices in central London’s most expensive areas such as Westminster and Kensington & Chelsea fell by 4.6 per cent in the year to September, according to figures from estate agent Savills.

    Across London’s pricier districts — including outlying areas such as Richmond and Hampstead — there was a sharp difference between the performance of cheaper properties and more expensive ones. Homes worth under £1m actually increased in value by 3 per cent in the past year, while those above £2m fell by 2.6 per cent.

    Lucian Cook, head of residential research at Savills, said the tax rise was likely to continue to constrain the top end of the market.

    “Many buyers are expecting a discount on last year’s prices at least equivalent to the additional tax,” he said. “By contrast, stamp duty changes have benefited properties in lower tiers of the prime market, which have performed more strongly.

    He added that it was questionable whether the OBR’s reduced forecasts for stamp duty receipts would be met.

    “Receipts have become increasing reliant on the top end of the housing market, where activity has been most subdued post stamp duty reform,” he said. “The cut in stamp duty for the majority of the housing market has failed to stimulate any significant additional market activity.”