Stamp Duty Land Tax (Temporary Relief) Bill

Lord Mackinlay of Richborough Excerpts

2nd reading & 2nd reading: House of Commons
Monday 13th July 2020 Commons Chamber

[John Glen]

I thank the hon. Lady for her point. I would look at it in terms of opening up the market, creating more churn and momentum that allows all participants to be able to get on the housing ladder.

The Government’s cutting stamp duty land tax in this way will mean that nine out of 10 people buying their main home will pay no stamp duty at all, and buyers can save up to £15,000. In my own constituency, the average family looking to buy a home worth £349,000 will go from paying £7,450 in stamp duty to absolutely nothing. Indeed, this Bill will take most properties outside of London and the south-east out of stamp duty entirely.

The Bill is the latest in a long line of measures from this Government designed to support current and prospective homeowners in this country. Historically, stamp duty has been charged at a single rate on the whole purchase price of a property, with different rates for different value bands. The same rate of tax was charged irrespective of the number of properties owned by the buyers. In 2014, the Government reformed stamp duty land tax on residential properties, cutting the tax for 98% of buyers who pay it, unless they are purchasing additional property. In 2015, the Government introduced the higher rates of SDLT, which apply on purchases of additional residential properties such as second homes and buy-to-let properties. Finally, in 2017, the Government introduced first-time buyers relief. This increased the price at which a property becomes liable to pay stamp duty, for first-time buyers, from £125,000 to £300,000, with a reduced rate between £300,000 and £500,000.

Together, these reforms have made the tax system fairer and more efficient. They have cut the cost of home ownership for first-time buyers, helping more than 500,000 families to secure a foot on the housing ladder. This Bill will cut the cost of home ownership further, at a time when personal finances are under considerable pressure. In doing so, it will inject new momentum into the property market, protecting thousands of jobs in both the construction industry and the wider economy.

This stamp duty cut is one of several measures in the Government’s plan for jobs that will benefit families and businesses across the country. From September, homeowners and landlords will be able to apply for a green homes grant of up to £5,000 to make their homes more energy efficient. For low-income households, we will go even further, with vouchers covering the full cost up to £10,000. This, too, will support local jobs, as well as reducing carbon emissions and cutting energy bills for hard-pressed families.

[Craig Mackinlay (South Thanet) (Con)]

I wonder if the Minister could clarify a couple of points. On the 31 March date, we all worry that this will end up being a cliff edge, as the date approaches. Will that be the date of exchange, which is usual, I think, in these matters? Is he not concerned about that cliff edge? For some people, for no reason of their own, late finishing of their property will mean they fall the wrong side, very expensively?

[John Glen]

I thank my hon. Friend for his point. We are in a situation where, if the transaction is substantially completed by 31 March, it will be able to qualify for the relief.

Almost four months ago, the Government took the extraordinary step of ordering businesses across the country to close for an extended and unspecified period of time. Millions of people put their lives on hold for the greater good, but now that the virus is under control, the time has come to reopen our economy. Providing infection rates remain low, people should be able to get on with their lives, wherever possible. There are few aspirations more important to the British people than home ownership, and this Bill will ensure that those looking to buy a family home will see their stamp duty bill disappear altogether. It is part of our plan to turn our national recovery into millions of stories of personal renewal. In doing so, it will stimulate the housing market, safeguarding many thousands of jobs and helping Britain to bounce back stronger than before. For all these reasons, I commend the Bill to the House.

--- Later in debate ---

[Craig Mackinlay (South Thanet) (Con)]

I warmly welcome this reduction in stamp duty land tax as part of the covid-19 stimulus provisions. The Minister has outlined very ably the stagnation that we have seen in the housing market over the past few months, with lockdown viewings obviously impossible. That has led to a very serious situation for conveyancers, solicitors, removal companies and all those involved in the supply chain of getting houses sold.

I very much welcome what is, actually, a simplification. We have gone down from six rates to just four. It gives us an opportunity to ask ourselves what is stamp duty land tax for and what is it doing to the residential market. We levy taxes in this country broadly for two reasons. Obviously, the first is to fill the public purse so that the public services that we all know and love—the defence of the realm, our policing, the NHS and everything else—can be paid for. We all realise that that tax cake has to be made up across myriad taxes, allowances and complications—a fairly mind-boggling number of them—and I am not sure that our 23,000 pages of tax legislation are much to be proud of. None the less, SDLT has proven itself to be a useful fill-up to the public purse, and it has been increasing in recent years. The residential market for the last four quarters has provided £8.4 billion in SDLT receipts for the Treasury.

We often use nudge theory—the second arm of tax if you like—to change behaviour. We use taxes to change behaviour, and we saw that with the £300,000 threshold for first-time buyers, which was introduced in November 2017 to help and encourage people into their first homes. We have also used SDLT with the 3% surcharge that came into place under the higher rate for additional dwellings rules that was introduced in April 2016. It is difficult to see exactly what the effect of that higher rate has been because we do not have the equivalent data from before that change happened in the second purchase market. None the less, it was imposed for good reasons and we can discuss that. It was used to dampen down the potential buy-to-let market, allowing more properties to be available to those genuinely seeking owner-occupation. Of that £8.4 billion raised in SDLT over the past four quarters, £3.8 billion has been in that 3% higher rate charge.

The Government have also introduced other tough tax measures, such as limiting the higher rate tax relief for landlords on their interest payments. That has come in over a phased period from 6 April 2017. There has been a restriction of lettings relief, operative from April 2020, for those who used to live in their own home and have now rented it out and it has subsequently been sold. There has been a number of red tape increases, so, for many small landlords, the pursuit of having rental properties has been somewhat dimmed over the past few years—so perhaps these measures have had the effect. There is no doubt that the £300,000 first-time buyer limit has been beneficial in many areas.

We have therefore used SDLT, as a nation, to flex behaviour—to encourage what we perceive to be good behaviour and discourage what is perceived to be bad behaviour, and that is not uncommon across the tax system. We see high rates of tax on alcohol and cigarettes to try to discourage bad behaviour, but then we enter that debate about what is fair. What is fair in capital taxes? We have capital taxes on inheritance tax, capital gains tax and, obviously, SDLT. Are they simply measures to fill the Treasury pot? Are they designed to be penal measures? Are they designed to be redistributive measures? Obviously, there is a wide debate to be had about the suite of taxes that we have, and we probably have 650 different views in the House about what is fair and reasonable.

The reduction in SDLT, with the first £500,000 at 0%, has “nudge” written all over it, because it is deemed a good thing to encourage people to keep the housing market rolling round. The rates that were in effect have obviously been perceived as an impediment to the normal functioning of that market, so, very thankfully, SDLT has been removed for most people until 31 March.

I do not think it even needs stressing that property transactions create a lot of business activity. That is taxable business activity: the conveyancers; the estate agents; the builders; the VAT on DIY sales. Commonly, the kitchen or bathroom gets changed as one of the first measures, and the lids come off the tins of paint that are purchased elsewhere.

But have we created fairness? Is the progressive SDLT banding system, which is continuing, fair? Is it fair that someone who buys a certain type of property in Kent pays more than someone who buys exactly the same type of property in, say, County Durham or elsewhere? They obviously face a higher charge because the value is greater, but then they are penalised for the property price because they enter a higher band. That unfairness is simply due to what could be called national and local planning failure over many decades. That extra SDLT has to be paid out of net salary that has been saved, or perhaps out of additional loans—or, for those lucky enough, from the bank of family.

Labour mobility will be really important in the future. I do not think we will see how important until this period of crisis with covid-19 is over. Employment will change and opportunities will change, and there will be a need for people to pursue jobs elsewhere. SDLT restricts their choice, because someone has to be not just a bit sure but very, very, very sure that the purchase they are making, with the incumbent SDLT, is really the right one. We dare not make a mistake when there are potentially fives or tens of thousands of pounds at stake.

I encourage the Chancellor, in his Budget later this year, to ensure that job mobility forms part of the tax system. Someone may have to rent a property elsewhere to test the area and the market, and they may have to rent out the old property that they leave elsewhere. Surely, there should be a tax relief on that new rent that they pay, against the rental income on the property that they had to leave to seek employment elsewhere. That could certainly be used elsewhere to help to nudge behaviour.

If we are going down the route of nudging through the tax system, let me suggest something that I have often proposed: downsizing relief for the elderly. Far too many elderly people are stuck in a property that is far too big for their current needs. They might have lost their partner, and they are now residing in a property that is simply too big. However, faced with the potential for a big SDLT charge if the rates come back into play after March, many older people will say, “Well, I’m simply not going to pay it. I don’t want to pay £5,000 or £10,000 just to move.” They will stay stuck in an inappropriate property, effectively blocking the bigger properties that many families are crying out for.

My message to Ministers today is that the new rates for SDLT should become permanent, for regional fairness, for job flexibility—that will be really important—and to encourage property transactions. We all know that property transactions create positive taxable work into the future, through either VAT or profits that are taxed through self-employment or a corporate regime.

My concern is that we are now creating a cliff edge. I think that, in the first weeks of April next year, we will all face stories of people who just could not quite get the job done before the cliff edge of 31 March, perhaps because a house that was meant to be built had problems or the builder was delayed; myriad issues could emerge. I feel very sorry for those who, for reasons not of their own making, will find themselves on the wrong side of that cliff edge date that we are creating. So I sincerely welcome these changes, but please let us make them permanent.