It is no hidden secret that the Chancellor Rachel Reeves needs to deliver big changes in her Autumn Budget on 26 November to fix the Government’s current financial predicament.
The Chancellor is stuck in an awkward position where she must try not to break her own tight fiscal and borrowing rules but needs to drive the economy forward and balance the Government’s books.
A hot topic of discussion has been changes to property tax. Changes mooted include abolishing Stamp Duty Land Tax (SDLT), introducing a national property tax as well as changes to Capital Gains Tax (CGT) and a National Insurance tax for landlords.
Nothing is set in stone, and we won’t find out the Chancellor’s plans until 26 November when she delivers her Autumn Budget but if any were introduced, it would completely change property tax in the UK.
How would these changes impact property tax?
The introduction of new regulations would give property a completely different dimension. The two main changes being discussed are the removal of SDLT and the introduction of a national property tax.
Removing SDLT would be a big risk for the Government given how much it generates. In the last financial year, SDLT raised over £11.6 billion, and abolishing it would see a significant revenue drop almost immediately.
SDLT is a transaction tax and applies when properties are being purchased. The SDLT rate applies to the value of a property when bought, increasing the more expensive the property purchase is.
Removing SDLT would likely coincide with the introduction of a national property tax which in essence would replace SDLT.
If introduced, a national property tax would see tax levied on properties worth over £500,000. The Government would set the annual rate with a higher rate set for property purchases exceeding £1 million.
Buyers would pay the tax yearly rather than up front during the purchasing process. This proposed tax would not affect buyers who purchase homes under the £500,000 threshold.
Unsurprisingly, these potential changes have been met with scepticism as many are questioning whether the plans will work long-term and generate the required revenue.
What would Capital Gains Tax look like under the potential changes?
Capital Gains Tax would also see a slight change under potential plans with the Government planning to remove the relief where you are entitled to keep all profit made on the sale of your asset.
The current Capital Gains Tax rates would apply to all sales and be taxed at the current CGT rates which is 18 per cent for lower rate taxpayers and 24 per cent for higher rate taxpayers.
Should this come into effect, the Government would need to clarify the boundaries and thresholds within which the CGT rate would apply. Like SDLT, CGT has also been a fruitful revenue stream for the Government, generating £13.3 billion in the last financial year.
Will there be a reform of property tax in the UK?
It is very difficult to say at this stage if the Government will completely reform property tax in the UK.
The Chancellor will be seriously considering a vast number of options to try and kickstart the UK’s economy and balance the Government’s books.
Property tax reforms would give her the ability to work within her tight fiscal rules but even this might not be enough.
The next couple of months are going to be shrouded in uncertainty until the Chancellor announces her Autumn Budget on 26 November.
If you have any concerns about property tax, our team are on hand to provide you with advice and support.
