Landlords’ stamp duty pain twice as bad as feared 

George Osborne's stamp duty hike is raising more money than expected for his predecessor as Chancellor, Philip Hammond
George Osborne's stamp duty hike is raising more money than expected for his predecessor as Chancellor, Philip Hammond Credit: Matthew Horwood

George Osborne’s raid on landlords and second-home owners has raked in an extra £1.4bn this financial year alone, twice as much as the former chancellor of the exchequer expected when he raised stamp duty on property investors.

Sustained purchasing numbers in the property market, combined with rising prices, mean analysts at the Office for Budget Responsibility expected the tax to raise £700m in the tax year 2016-17.

From April last year, buyers have had to pay an extra stamp duty surcharge of 3pc of the value of a home if it is not their main residence.

The changes caused a stampede into the market as investors scrambled to buy properties before the end of March.

Despite attempts to avoid the charge, the tax has still raised more than initially expected.

Those booming revenues will increase further in the years to come as house prices rise, and the steady flow of buyers resumes after March’s rush.

Next year the surcharge is forecast to bring in £1.7bn, £1.8bn in 2018-19 and 2019-20, and £1.9bn in 2020-21. That means the tax is now in line to bring in £8.6bn over its first five years in operation, almost double the £4.6bn initially forecast.

It will keep on rising after that date, the OBR predicts, raising £2bn in 2021-22.

There may be some small relief as taxpayers can claim relief if they were charged the extra rate on a second home but then sell their first home in the following three years.

None the less, the OBR has raised its forecasts after the surge in tax payments this year.

The extra tax paid by landlords and second-home owners is a key contributor to the rising stamp duty haul, though rising prices are also contributing, as the tax is levied as a proportion of the property’s price.

In total, stamp duty land tax is due to raise £11.6bn in this financial year, rising annually to hit £17bn in 2021-22, the OBR believes.

Back in 2008-09 it only raised £4.8bn, indicating the scale of the rise as stamp duty has been tweaked and house prices have soared.

The average property sold in December 2016 cost £220,000, the Office for National Statistics says.

That is up from £154,500 at the low point of the crisis-era housing price crash in early 2009.

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