Burnham’s property and land tax: what would it mean for property owners?
With reports suggesting that property and land taxes could be on the cards under Burnham, Simon Gerrard, Chairman of Martyn Gerrard Estate Agents, comments on what these proposals could mean for homeowners, particularly those in London who are likely to bear the brunt of any changes, given the capital’s significantly higher property values.
On uncertainty:
“If Burnham’s assumption of office is meant to usher in a new era, it’s begun with the same old mistakes made by the short-lived leaders of recent years. That is, with promises of big disruptive change casting a cloud of uncertainty across the market.
“We were supposed to enjoy a period of relative political stability after the tumult caused around the anticipated Budgets of last year. Now we’re back to sweeping reforms and new taxes being mooted through the press. This has a chilling effect not just on the housing market, but the wider economy as people hold fire and press pause on making decisions.
“Burnham would have been far wiser to signal continuity and safety. Our revolving door of leaders keeps shaking everything up in a bid to solve our problems when what the country desperately needs is a steady hand on the tiller to stay the course. Stability and certainty would provide the foundation for confidence, investment and economic growth. Mr Burnham continuing with promises of radical change to cure all our woes is likely to have the same effect as every other time before.
On stamp duty abolition:
“The abolition of Stamp Duty would be a brilliant thing. The tax prevents people from moving house, stops the property market functioning properly and leads to family homes sitting empty instead of being freed up for aspirational parents to have room for their own children. It has a chilling effect on transactions and the knock-on repercussions for the wider economy are significant.
“However, all this talk about it being potentially abolished is wreaking havoc on the property market. We’re even seeing agreed sales being paused and deals falling apart because no one wants to pay a large stamp duty bill right before it’s potentially abolished. All this noise is not boosting the economy and property market, it’s destroying it.
“A clear signal needs to be urgently sent as to what will happen to those people paying Stamp Duty now. At the moment, many people are putting off purchasing decisions because they fear paying a hefty amount in Stamp Duty on a home and then having this new tax imposed on top. Anyone who’s paid Stamp Duty on a property prior to any land value tax should receive an exemption for an amount of time equivalent to what they’ve already paid. Without this, the market will cease to function.
“The government has a duty to instil confidence and maintain stability that it has completely forgotten.”
On Land Value Tax:
“Imposing an annual land value tax could lead to catastrophe if it is not implemented correctly. Above all, there needs to be an appreciation that the London market is different from the rest of the country. Saddling ordinary people with eye-watering tax bills just because they live in London is illogical. If care isn’t taken, this could see property values in the capital and South East crash, mortgage-holders trapped in negative equity and families unfairly hit with eye-watering bills.
“There are also huge questions around the logistics. It will take three to five years to implement because every property across the country will need to be valued. This will be a hugely expensive and laborious undertaking, which will outweigh any revenue generated for the first few years.
On LVT rental market effects:
“The knock-on effects for the rental market also need to be seriously considered because landlords are already leaving the market as it is. If there’s a rent freeze in place preventing the additional costs being passed on, they will have no choice but to sell up, which will exacerbate the sharp falls in house prices.
On CGT and income tax changes:
“Other potential tax rises on capital gains tax or on wealth will backfire as previous attempts have all done. All it will do is deter investment and growth. If CGT becomes too high then it will undo much of the benefit of removing Stamp Duty. Those risking large bills will simply avoid selling and wait for the next government to lower the tax again.”
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