The deputy director of the Institute for Fiscal Studies, Helen Miller, said it was “mad” to allow expectations to develop of a possible reduction in the tax on property sales, as it will encourage potential buyers to put off their move until after the change comes into effect.
Reports suggest that the chancellor is planning to use his emergency economic statement on Wednesday to announce a temporary six-month hike to between £300,000 and £500,000 in the threshold for paying the duty, in the hope of reviving a housing market which remains sluggish following the lifting of coronavirus lockdown restrictions.
But, crucially, it was reported that the exemption would not come into effect until after this autumn’s budget. Treasury sources refused to discuss details of the chancellor’s plans, but did not rule out the possibility of changes to stamp duty.
The levy is currently charged at 2 per cent on the portion of a property’s selling price between £125,000 and £250,000 and 5 per cent on the next £675,000.
Setting the new threshold at half a million pounds would cut £2,260 from the cost of buying an average £238,000 home and £15,000 from purchases worth £500,000 or more. The maximum saving if the cut-off point is raised to £300,000 would be £5,000.
But Ms Miller told The Independent: “The government really should be keeping tight-lipped about these things.
“If you are thinking about buying a house and there is the prospect of cutting your tax bill by £15,000 in a few months’ time, in most cases you are going to think it is worth waiting.
“At the moment, the housing market has largely been gummed up by social distancing measures. If the government thinks the housing market is going to be slow to restart, this is a tax you can deploy quickly with the expectation that it will encourage people to buy and sell homes.
“But a lot of people are going to be wary of moving now because they don’t know what the future holds and they are waiting for certainty about their jobs.
“It would be better to wait and see if you need this fiscal stimulus before you enact it, and it’s a really bad idea to pre-announce it or trail it, because people will just delay. If the chancellor wants to do it, he has to announce it and say it’s happening now.
“The same is true for VAT, because people will put off a major purchase like a fridge-freezer if they think they can save tax in a few months’ time.”
Preannoucing/trailing a stamp duty holiday is mad. It will (obviously) stop people buying/selling houses until the cut. @RishiSunak should now enact an imediate cut or rule out the idea @Steven_Swinford @PhilAldrick— Helen Miller (@HelenMiller_IFS)July 6, 2020
The chancellor is expected to make a number of announcements in an economic update on Wednesday – the most notable being the expansion of apprenticeships across the UK.
The Treasury is to invest more than £110m in traineeships for 18-24 year olds as Mr Sunak unveils an economic strategy to deal with the aftermath of the Covid-19 pandemic – which has hit young people in work particularly hard.
Businesses offering new traineeships in England will receive a £1,000 bonus per trainee under the scheme, while eligibility for the schemes is to be expanded to ensure more young people can access high quality training.
The multi-million investment will aim to triple the number of trainees in England – close to 15,000 people took on traineeships in 2018-19 – and also increase the funding providers receive for training.