Chancellor’s reform of ‘slab’ system draws praise but green builders bemoan ‘missed opportunity’
Chancellor George Osborne used his last Autumn Statement before next year’s election to give the housing market an unexpected £800m annual boost through a root and branch reform of stamp duty which will help buyers of homes under £930,000.
Osborne acted to abolish overnight the widely derided “slab” basis on which stamp duty is calculated, in a move that has long been called for and which was welcomed by lobby groups in the housebuilding industry. However, Osborne’s statement, which also included reforms to taxation of construction workers and firms employing apprentices, failed to provide a significant boost to capital spending in the North many had expected.
The reform of stamp duty, effective immediately, saw the introduction of new bands which Osborne said meant 98% of home sales will incur lower tax, effectively making it cheaper to buy any home under £937,500 in value. Osborne described the changes as a “fair, workable, lasting reform to the taxation of housing.”
Osborne’s move means that stamp duty will now be calculated in the same way as income tax, with the proportion of the price of a property in each band taxed at the set rate. It will see an end to the current system whereby a home sale at £250,000 pays £2,500 in stamp duty, but a sale for £250,001 pays over £7,500.
A spokesperson for the Home Builders’ Federation said: “This is something we’ve always called for. The ‘slab’ system penalised buyers and influenced what homes builders could build around the £250,000 value. The new system will create a more active market and boost new home sales.”
Under the reforms, someone buying a home for £275,000, the UK average, will pay £4,500 less than under the previous system. However, someone buying a property for £5m will now pay over £500,000 in stamp duty, £164,000 more than previously.
Mark Farmer, head of residential at EC Harris, said the change would influence what developers in the London market were likely to build. He said: “This will undoubtedly have an impact to cool the top end of the market. It will affect what people build. There’s already been a sense that prime London property is overvalued and developers have been looking further out - the stamp duty change will reinforce this trend.”
The UK Green Building Council described the reform as “the mother of all missed opportunities” because it failed to link the payment of stamp duty to the energy performance of the home being sold - something the group has argued for.
John Alker, Director of Policy and Communications at the UK Green Building Council, said: “For years we’ve been told by Treasury that stamp duty cannot possibly be touched. But today’s changes blow a hole in that theory.”
Osborne also used the speech to trail potential changes to the way construction workers are taxed under the Construction Industry Scheme, and plans to clamp down on “umbrella companies” which he said he would look to bring forward in next year’s Budget.
|New Stamp Duty Thresholds|