Stamp duty contribution in prime central London plummets

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London Central Portfolio has carried out a detailed analysis of HMRC’s Annual Stamp Duty Statistics 2016-17, published on 30th September 2017

• Residential Stamp Duty receipts increased 17 per cent to £8,590m in England and Wales due to the introduction of the 3 per cent Additional Rate Stamp Duty (ARSD), charged on purchases of second properties
• However, London’s take was up just 1 per cent to £3,410m and Prime Central London (PCL) showed the biggest fall, down 10.3 per cent
• As a result, PCL’s contribution to Stamp Duty tax take is down a massive 23.5 per cent
• Transactions have also fallen by 8 per cent in England and Wales
• London saw the largest drop in transactions at 17 per cent, with falls across all price band
• The most notable fall was for property purchases in corporate wrappers, with a drop of 52 per cent in transactions and 58 per cent in Stamp Duty receipts

Whilst Stamp Duty receipts increased 17 per cent to £8,590m in England and Wales, statistics from HMRC reveal that the graduated Stamp Duty system, coupled with the Additional Rate Stamp Duty (ARSD) on second purchases, has negatively impacted the London property market.

London saw receipts increase by only 1 per cent to £3,410m and experienced the largest fall in residential transactions at 17 per cent. Transactions under £250,000 fell by 25 per cent, between £250,000 to £1m by 13 per cent and over £1m by 15 per cent. London also saw Stamp Duty tax receipts fall 8 per cent above £1m.

In Prime Central London (the City of Westminster and the Royal Borough of Kensington & Chelsea) receipts have fallen 10.3 per cent compared with last year. Whilst it continues to generate the largest contribution to Stamp Duty in the country, its overall contribution has fallen by 23.5 per cent, from 14 per cent to 10.7 per cent.

Naomi Heaton, CEO of London Central Portfolio, comments: “The new Stamp Duty regime has clearly had a significant impact on London. With the budget approaching, the Government needs to carefully consider the fiscal damage of any future residential tax increases. Whilst Stamp Duty take has been buoyed up in 2016-17 by the additional 3 per cent ARSD charge, now representing 40.7 per cent of all tax take in London, any new deterrent could tip the scales in the other direction. Despite political hyperbole, at 22 per cent of all transactions, London does not have disproportionately more ‘second’ properties, liable to the ARSD charge, than other parts of the UK. Reliance on ARSD to prop up a market where transactions have fallen 17 per cent year-on-year is a dangerous gamble”.

Whilst only briefly referred to, HMRC also report that tax take from properties purchased in corporate wrappers has taken a massive tumble. Buyers have been liable to a 15 per cent Stamp Duty charge, alongside paying an annual tax, the Annual Tax on Enveloped Dwellings (ATED), up to £218,000 per annum. Transactions fell 52 per cent and receipts plunged 58 per cent in 2016-17. With £178m of ATED collected by the Government in 2015-16, this decrease in corporate purchases could see a big tax reduction, not included in HMRC’s Stamp Duty statistics.