National Property Tax is a win for first time buyers
The proposed National Property Tax will be a win for families climbing the property ladder and some first-time buyers, say leading audit, tax and business advisory firm, Blick Rothenberg.
Heather Powell, a partner at the firm, said: “If Stamp Duty Land Tax (SDLT) is replaced by National Property Tax, a tax paid by the seller on the sale of a home worth more than £500,000, the costs of buying a property will significantly reduce for first time buyers whose first home costs more than £300,000 and families working their way up the property ladder. This is likely to make it easier to move house, and thus help create a more mobile workforce, able to relocate to areas where there are jobs.”
She added: “However the imposition of a selling tax, at a rate still to be set by the government, is a massive disincentive for anyone looking to downsize, especially if they are managing their estate to ensure that they will not have a liability to Inheritance Tax. Why would parents volunteer to pay a Property Tax on the sale of their property, and reduce the legacy they leave their children?”
Heather said: “The National Property Tax will see the end of the principal that no tax is payable by the seller on the sale of their family home – the much loved “Principal Private Residence” tax relief. The new tax may not be called Capital Gains Tax, and indeed will not be payable on any profit made by the home owner, it is payable on the selling price, but will create a tax payable by the seller when a property is sold.”
She added: “It is not known if this new tax will be payable on the proceeds over £500,000, or, if the proceeds are greater than £500,000 a tax liability based on the total price payable will be due. Both options will create a cliff edge that will cause distortion in the housing market.”
Heather said: “No details are given of the rate of tax that would be payable on the sale of a “principal private residence” but the estimates given indicate that only 20% of property sales will be caught by the new tax – compared to 60% of property sales on which SDLT is currently paid. The tax collected will be collected at a rate sufficient to be equal to the current SDLT receipts (£11.6m in the last financial year), so the tax rate is likely to be significant. The top rate of SDLT for a UK buyer of their family home is currently 12%, will the National Property Tax need be levied at a higher rate to maintain tax receipts?”
She added: “The proposals for the replacement of Council Tax with a Local Annual Property Levy, based on the value of the family home, may address this issue but this is unlikely to be introduced by the current government. The immediate result of the introduction of a National Property Tax is likely to be a significant slowing down of the property market, particularly in the South East where the average price of family homes is over £500,000, and a drop in the tax revenues collected by the government. Not the answer the chancellor needs when trying to fill the £40bn black hole in her budget.”