Over a million homes sold in 2021/22, raising £10bn of tax

2021/22 saw many changes in stamp duty land tax (SDLT). This was primarily due to the coronavirus pandemic’s impact on the property market as we entered the new financial year in April 2021, with restrictions still in place and SDLT ‘holidays’ still available to be utilised. That financial year also saw the introduction of the 2% non-resident SDLT surcharge, applicable to purchases of residential property in England and Northern Ireland by non-UK residents. 

The SDLT statistics published by HMRC show that 2021/22 saw a 69% rise in residential SDLT receipts compared to the understandably subdued previous year – the result of a booming property market spurred on by the SDLT holidays and, possibly, cabin fever brought on by the various ‘lock downs’.

Although many sellers and those already invested in property have benefitted from an increase in property prices, the markets have perhaps not been so inviting for investing landlords. Many landlords of residential property are being impacted by restrictions on tax deductions for mortgage interest and constraints on rental increases, as well as potentially needing to keep in line with the proposals in the Renters’ Reform Bill, intended to be enacted this year.

It has been apparent that the restriction on tax relief for interest has caused some landlords to incur net pre-tax losses and yet still incur a tax liability, or else generate a post-tax loss on an otherwise profitable business. This, coupled with increased property prices, means that the return from such investment is not so attractive, so could this mean a flood of properties hitting the market if landlords seek to invest elsewhere in the near future?

It was a seller’s market in 2021/22, but from a review of property prices and movements more recently, it may well be a different story for the current year. The quarterly statistics for the last period of 2022, whilst showing a small rise in residential SDLT receipts of 4% in comparison to the same quarter in 2021, show a decline of 12% over the previous quarter. However, this may be as much due to the increase in the nil rate and first-time buyers’ relief thresholds from 23 September 2022, as it is to falling property prices.