CIOT concerns recognised as SDLT Bill passes through Lords

The Bill aims to help the housing market and cut down the cost for first-time buyers. The reforms include:

• An increase in the nil-rate thresholds of stamp duty land tax (SDLT), from £125,000 to £250,000.
• A rise in the nil-rate band for first-time buyers’ relief, from £300,000 to £425,000.
• A boost in the maximum amount first-time buyers can buy a house for and still be qualified for relief, from £500,000 to £625,000.

As the Government stated during the Autumn Statement, these measures will stay in place until March 2025 after which the thresholds revert to previous levels.

Ahead of the debate, CIOT and the Stamp Taxes Practitioners Group (STPG) provided a joint briefing to peers drawing their attention to technical defects in the existing legislation for first-time buyers’ relief. These related to buying through a nominee, previously acquiring a mixed-used property, previously acquiring a past share in a dwelling and previously acquiring a major interest in a dwelling.

During the debate, Lib Dem Treasury Spokesperson Baroness Kramer noted the ‘loopholes and anomalies’ identified by CIOT and the STPG and asked the Government to investigate them further. While recognizing that the Lords is unable to amend tax legislation, Kramer hoped that “the Government will follow up what the institute has said because one of our curses is poorly drafted legislation that then has to come back to this House.”

In response, the Parliamentary Secretary (HM Treasury), Baroness Penn, said that the Government were aware of the CIOT/STPG points. She told peers: “We have asked officials in HMRC and the Treasury to work with those groups to discuss their comments.’’

More generally on the Bill, Kramer thought it would do little to achieve its main purpose of stimulating the housing market. A small change to SDLT “does not compensate for the surges in interest rates driven by the Government’s economic mismanagement,” she argued.

There was also criticism from Labour’s spokesperson, Lord Tunnicliffe. He suggested that the Bill will be more beneficial to  property owners and those who own a second home than to those trying to get onto the property ladder.

“The last stamp duty cut did not provide as much help to first-time buyers as promised and its overall effect on the market put many starter homes out of their reach,” Tunnicliffe argued. “Ministers are seemingly repeating the same failed experiments, desperately hoping the outcome will be different.”

There was only one backbench speaker in the debate, Conservative Lord Greenhalgh, who argued that SDLT needs to come down to remove disincentives to mobility. He said he had looked at the statistics, and what you see is this: “if you increase stamp duty, as we have done remorselessly in the decades from 2000 to the present day — except for this brief respite, and a previous respite for a period of time under Chancellor George Osborne — you will see a reduction in the number of transactions overall. That comes through very clearly. As soon as the first relief was introduced because of Covid, transaction levels in London rose from 4,800 to 5,300, and in the rest of the United Kingdom transactions also rose dramatically. While the tax take may not have, people were moving more, which I think is a good thing.”

Greenhalgh asked the minister whether there are any plans in place for a longer-term commitment to cut SDLT, so people can purchase appropriate homes based on their needs, including downsizing in their older years.

Responding to the debate for the Government, Baroness Penn agreed with Greenhalgh on the need for mobility in the housing market, but felt that this Bill struck the right balance.

She also responded to a specific question from Greenhalgh about shared ownership, explaining: “First-time buyers’ relief is available on shared ownership purchases. Relief would then not be available on subsequent purchases. However, where someone intends to staircase up the shared ownership ladder, the option is available to them to pay 100% of the stamp duty up front and therefore claim the first-time buyers’ relief and not pay it again as they staircase up. I think that is a useful element of the system.”

Penn had earlier told peers that, as a result of this Bill, more than half of all transactions in the East Midlands, the North-West, and Yorkshire and the Humber will pay no SDLT until 31 March 2025, with 6 in 10 transactions in the North-East having no SDLT liability. Moreover, those willing to downsize can now save some money in stamp duty costs. For instance, in the East Midlands, if a pensioner would like to move to a house worth around £230,000 (the average for a semi-detached property in the region) they will now save £2,100 in stamp duty costs.

The Bill is expected to get Royal Assent soon (yet to be scheduled). You can view the full Lords debate here.