More than two thirds of buyers in England & Wales will benefit from stamp duty changes

Transcription

1 Special feature More than two thirds of buyers in England & Wales will benefit from stamp duty changes 86% of housing transactions in London & the South East should benefit from the new marginal stamp duty regime 85 in Cardiff North to see reduction in stamp duty payable The changes to the Stamp Duty Land Tax (SDLT) announced in the Autumn Statement may help stimulate housing market activity. The slab structure was completely abolished, with purchasers paying the marginal tax rate on the relevant elements of the purchase price. 98% of buyers will pay the same or less tax; only those purchasing homes costing between 937,500 and 1,000,000 or more than 1,125,000 are set to pay more (see chart below). The new marginal SDLT should help to remove the distortions caused by the slab structure, which led to a clustering of transactions. The greatest impact is likely to be for homeowners looking to buy property just above 250,000, who could save around 5,000 in tax (or c2% of the purchase price). The benefits tend to be greater in areas where average house prices are higher and thus a higher proportion of transactions are liable for stamp duty. We estimate that 86 in London and the South East government office regions would benefit from the changes, compared with around 50% across the North East, North West, and Yorkshire and The Humber. Impact of SDLT changes by govt. Benefit No Pay more office region change London 86% 7% 7% South East 86% 13% 2% South West 81% 18% 0% East of England 81% 18% 1% West Midlands 61% 39% 0% East Midlands 58% 42% 0% Wales 53% 47% 0% Yorks & The Humber 53% 47% 0% North West 51% 49% 0% North East 45% 54% 0% England & Wales 71% 28% 2% In the following sections, we explore in more detail the impact of the changes within each region, identifying which parliamentary constituencies are expected to benefit most from the new marginal tax system. There is a wide range of variation amongst constituencies, reflecting diverse transactions patterns and house prices. Based on 2013/14 transactions data from the Land Registry, nearly 590,000 purchasers in England & Wales would benefit under the new regime, with an average benefit of c 1,600. Using this data we are also able to examine the impact of these changes at a parliamentary constituency and government office region (GOR) level. The average SDLT paid is expected to be lower in 97% of constituencies under the new system. 1

2 London 86% Average benefit 2,175 Carshalton and Wallington Kensington South East 86% Average benefit 1,740 Wokingham Dover The London region sees the highest proportion of transactions, but also the highest proportion paying more stamp duty. This reflects that house prices in the capital are substantially higher than elsewhere, meaning almost all transactions in the capital are liable for stamp duty. Only a very small proportion of purchasers in England & Wales will pay more stamp duty under the new system and the majority of these are in London. Nonetheless, most people buying property in London will benefit from the changes (an estimated 100,000 would benefit based on 2013/14 transactions), with only those buying properties above 937,500 facing a higher tax bill (an estimated 8,400 would pay more tax in London). A marginal system should also help to remove the distortions caused by the previous thresholds, which led to a significant bunching in transactions (see chart below). The vast majority of purchasers in the South East government office region are set to benefit from the stamp duty changes. Based on 2013/14 data from the Land Registry, around 130,000 transactions would benefit under the new system, with just 2,500 paying more. In the Wokingham constituency in Berkshire, 93% of transactions benefit (around 1,800). The average SDLT payable is expected to fall by 24% from 8,000 to 6,100. The Dover constituency has the lowest proportion of transactions, with 70% expected to be better off as a result of the changes. The remaining 30% will not be disadvantaged however, with zero change in the SDLT payable. Across the South East region as a whole, only 2% of transactions will be subject to a higher level of SDLT. The Esher and Walton constituency in Surrey has the highest proportion of transactions paying more in the region, with 15% expected to pay more. The average stamp duty bill here is projected to increase by 10% to 31,800. In all other South East constituencies however, mean SDLT is expected to fall, with Southampton Itchen seeing a 40% reduction. The Carshalton and Wallington parliamentary constituency in Sutton has the highest proportion of transactions (based on 2013/14 data), with an estimated 95% seeing a reduction in the level of SDLT payable. In contrast, Kensington has the lowest proportion of beneficiaries, as a result of very high house prices. In fact, this is the only constituency in the country where the majority of purchasers would be worse off under the new system, with 51% expected to pay more. 2

3 South West 81% Average benefit 1,445 Mid Dorset and North Poole Plymouth, Moor View East of England 81% Average benefit 1,540 St Albans Peterborough Over 80 in the South West of England should benefit under the new marginal stamp duty system. This equates to around 77,000 transactions, based on 2013/14 activity levels. The Mid Dorset and North Poole constituency is expected to see the highest proportion of beneficiaries, with 92% set to pay less tax under the new system. The Plymouth, Moor View constituency sees the lowest at 54%, although this is primarily as a result of being a comparatively low priced area, meaning that fewer transactions pay stamp duty. The average stamp duty bill in the South West is expected to fall by nearly 25% to around 3,500. The biggest percentage reduction is in Bristol East, where the average SDLT payable will be nearly halved from 1,700 to 900. The smallest percentage fall is expected to be in Poole at 4%. Those in Bath, the most expensive constituency in the South West, will see average SDLT fall by 11% to c 9,100. Around 81,000 transactions in the East of England government office region are expected to benefit from the stamp duty changes announced in the autumn statement. Average stamp duty payable in the region is set to fall by around 20% from 5,400 to 4,200. In St Albans, 92 will see a reduction in SDLT. The average benefit will be around 2,300. Within the East of England, Peterborough has the lowest (48%). This reflects that Peterborough is the lowest priced constituency in the region and thus has a high proportion of housing transactions below the 125,000 stamp duty threshold. All constituencies within the region are expected to see a reduction in the average stamp duty payable. The largest percentage reduction (based on 2013/14 activity) is in Norwich North, where the average SDLT will fall by 44% to around 1,100. Hitchin and Harpenden is expected to see the smallest percentage reduction (6%). 3

4 West Midlands 61% Average benefit 1,330 Kenilworth and Southam Stoke-on-Trent Central East Midlands 58% Average benefit 1,255 South Northants Nottingham North Around 60 in the West Midlands should benefit from the stamp duty reforms. This is equivalent to around 43,000 transactions per year. Kenilworth and Southam in Warwickshire is the constituency with the highest proportion of transactions, with 88% expected to pay less SDLT as a result of the reforms. Stoke-on-Trent Central has the lowest proportion at 17%. It should be noted however that the vast majority of transactions in the constituency do not pay any stamp duty at all, with an average bill of just 200 under the new system. The Hodge Hill constituency in Birmingham has the lowest average SDLT at just over 150. The average stamp duty bill in the West Midlands is expected to fall by 30% from 2,700 to 1,900. Stratford-on-Avon has the highest average stamp duty bill of the West Midland s constituencies, but purchasers here should see a reduction of nearly 20% from 7,900 to 6,400. Approximately 40,000 transactions in the East Midlands benefit from the stamp duty changes (based on 2013/14 activity), just under 60% of the total. Our analysis suggests that the South Northamptonshire constituency would have the highest proportion of beneficiaries, with 89% seeing a reduction in the level of stamp duty payable. In Nottingham North, only 12% benefit from lower stamp duty, although the remaining 88% will see no change (as they are not liable for stamp duty). This constituency also has the lowest average SDLT in the region, estimated at just 75 under the new system. Average prices in Nottingham North in 2013/14 were around a third of those in Derbyshire Dales, the most expensive constituency in the region. All constituencies within the East Midlands are expected to see a reduction in the average stamp duty payable. The average across the region is expected to fall by 32% from 2,200 to 1,500. 4

5 Wales 53% Average benefit 1,220 Cardiff North Rhondda Yorkshire and the Humber 53% Average benefit 1,270 York Outer Kingston upon Hull East Over 50 in Wales will pay less stamp duty under the new system, with around 20,000 purchasers set to benefit. 85 (around 1,200 based on 2013/14 levels) in Cardiff North will see a reduction in their stamp duty payable, the highest amongst Wales parliamentary constituencies. In the Rhondda constituency (which includes Tonypandy and Treherbert), only 7% will make a saving, although the remaining 93% will see no change, as they would not have paid any stamp duty anyway. Indeed, the average stamp duty payable in Rhondda under the new system is expected to be less than 75, the lowest in the principality. It also has the lowest average house prices amongst all constituencies in England and Wales. The average stamp duty payable in Wales is expected to fall by around a third from 1,900 to 1,200. The marginal system should also help to remove the distortions caused at the thresholds by the slab structure, which led to a bunching in transactions at 125,000 and 250,000 (see chart below). An estimated 53 in Yorkshire and the Humber government office region will benefit from the stamp duty reforms announced in the autumn statement. This is equivalent to around 36,000 transactions per year, based on 2013/14 levels. Nearly all of the remaining transactions will see no change in the level of stamp duty payable. Over 90 in the York Outer parliamentary constituency look set to benefit under the new system, around 1,500 properties. Kingston upon Hull East has the lowest proportion of transactions seeing a fall in their average duty bill at 17%, although the remaining 83% will see no change. The vast majority of transactions in the constituency are not liable for stamp duty, being at or less than 125,000. The average duty payable is the lowest in the region at just over 100 under the new system. In contrast those in Harrogate and Knaresborough, the most expensive constituency, can expect to pay around 4,700. The average stamp duty payable in the government office region is expected to fall by around 30% from 2,100 to 1,500. 5

6 North West 51% Average benefit 1,290 Altrincham and Sale West Liverpool, Walton North East 45% Average benefit 1,205 Hexham Middlesbrough Around half of transactions in the North West government office region will see a reduction in the level of stamp duty they have to pay. The Altrincham and Sale West constituency in Greater Manchester has the highest proportion of beneficiaries, with 86 (around 1,500 in 2013/14) paying less stamp duty under the new system. Meanwhile in Liverpool, only 8 in the Walton constituency see a reduction in stamp duty payable. That said, very few transactions in this area pay any stamp duty at all, given average house prices are amongst the lowest in the country. Indeed, the average stamp duty payable in Liverpool, Walton is expected to be less than 50 under the new system, the lowest of all English & Welsh constituencies. Across the North West government office region, the average level of stamp duty payable is expected to decline by nearly 30% from 2,200 to 1,600 under the new marginal tax structure. The smallest percentage reduction is expected to be in Tatton in Cheshire (an estimated 11%), the most expensive constituency in the region. 45 in the North East government office region will benefit from the new marginal stamp duty structure, the lowest amongst England & Wales. This reflects that average house prices are lower in this region and hence fewer transactions are liable for SDLT. Our analysis suggests that in the Hexham constituency in Northumberland, 73 would see a reduction in the level of stamp duty payable. However, Hexham is also by far the most expensive constituency in the North East and will continue to see the highest SDLT bills, which are expected to average around 4,900 under the new system. Middlesbrough has the lowest proportion of transactions making a saving (22%), although this largely reflects the high number of transactions already below the stamp duty threshold. Middlesbrough has the lowest average stamp duty payable amongst all constituencies in the North East and the under the new regime this will be less than 250. The North East government office region has the lowest average stamp duty amongst England & Wales and this is expected to fall by around a third to 1,075. 6

7 Notes 1. Based on Nationwide analysis of Land Registry price paid data for 2013/14 for England & Wales. Further details regarding price paid data is available from gov.uk: certain sales are excluded see 2. Transactions have been grouped into Westminster parliamentary constituencies and government office regions based on the property postcode. Note that government office regions differ from the Nationwide house price regions. 3. Average house prices quoted are mean arithmetic averages calculated using Land Registry price paid data for 2013/14. These are not directly comparable to the figures presented in the Nationwide house price index. 4. The proportion of transactions and average stamp duty land tax (SDLT) payable under the new system is illustrative only. Benefits realised will depend on the pattern of transactions and distribution of purchase prices from December 2014 onwards. 7