Taxes on home buyers to hit 1970s level Tax bills for home buyers will almost double during the next five years, as rising asset values push up capital taxes to their highest levels since the early 1970s, according to official forecasts. The Office for Budget Responsibility has said receipts from stamp duty, inheritance taxes and capital gains tax were set to rise to their highest share of gross domestic product “probably for at least 50 years”. The fiscal watchdog forecast that the average effective stamp duty land tax rate paid by a home buyer would rise from 1.7 per cent in 2008-09 to more than 3 per cent in 2018-19, as rising house prices pushed more property into the higher-rate bands. The tax is expected to rake in £18.1bn by 2018-19, up from £9.5bn this year. Rising house prices will also trigger a doubling in the number of estates liable for inheritance tax during the next five years, from just under one in 20 to just under one in 10. With housing accounting for almost half the value of estates, the OBR expects the inheritance tax take to rise by 11 per cent a year. Rising property prices have a disproportionately big impact on stamp duty land tax because of its “slab” structure, which forces buyers to pay a higher rate of tax on the entire property price if it exceeds a particular threshold. This year average house prices will have reached £250,000, the threshold at which the stamp duty rate rises from 1 per cent to 3 per cent. The amount of stamp duty paid on a transaction rises from £2,500 for a transaction worth £250,000 to £7,500 for one worth £1 more. The OBR predicted that average house prices would be 28 per cent above the £250,000 threshold by 2018-19. The structure of the tax together with the rebound in property transactions, strong house price inflation in London, which accounts for more than 40 per cent of revenues, is set to further push up receipts from the tax by 37 per cent to £9.5bn this year. It has forecast that the yield from the four capital taxes would increase by half, from 1.2 per cent of GDP in 2013-14 to 1.8 per cent by 2018- 19 – higher than their 1.6 per cent peak in 2007-08, before the financial crisis. A rise in stamp duty on shares is also forecast, reflecting rising equity prices. The OBR said capital gains tax receipts would grow strongly, reflecting growth in house and equity prices, although it cut its forecast to reflect much weaker than expected receipts in 2012-13.
Posted on: Thu, 20 Mar 2014 17:55:32 +0000
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