A senior property adviser has warned that government initiatives to support first-time buyers will fall short without comprehensive reform of the UK’s stamp duty system, which he argues is deterring the investment needed to deliver new housing supply.
Stephen Hemmings, Partner and Head of Property Sector at business advisory firm Menzies LLP, made the comments ahead of the Budget later this month, which is expected to include the launch of the Your First Home scheme for first-time buyers.
“The property sector urgently needs stability from this Budget, along with a clear signal that the Government wants to encourage investment rather than keep treating property as an easy route to tax revenues,” Hemmings said.
Cumulative tax burden
Hemmings pointed to a 15-year accumulation of tax changes affecting the property sector, including modifications to Stamp Duty Land Tax, Annual Tax on Enveloped Dwellings (ATED) rules, higher income tax for buy-to-let investors, and increased corporation tax for developers. He said this cumulative burden has damaged market confidence.
The adviser also noted that buyers face challenges from high interest rates, heavy tax burdens and rising costs, factors that could complicate the government’s target of delivering 1.5 million new homes by 2029. These economic pressures raise concerns for the UK property market more broadly.
Investor surcharge impact
“Current Stamp Duty rates deter transactions, particularly at higher values, and cutting them could also prop up the professional services and construction firms that are facing a similar decline,” Hemmings stated.
He specifically highlighted the 5% surcharge on stamp duty for investors in new rental homes as a barrier to increasing housing supply, noting that whilst the Your First Home scheme may attract first-time buyers, it does not address this investor deterrent.
Hemmings called for a comprehensive review of the property tax regime and a clear roadmap for future policy, including clarity on the direction of the Mansion Tax amid speculation about a lower threshold.
Market instability concerns
“At present, every fiscal event triggers artificial market activity as investors and businesses try to get ahead of potential tax increases, with speculation over Stamp Duty, capital gains and inheritance taxes rarely out of the headlines,” he said.
He argued that the current approach is not conducive to healthy market operation and that the UK’s tax system, including the stamp duty surcharge for non-UK residents, needs reform if the country wishes to encourage international investment and the associated employment and tax revenues.
The comments come as the property sector awaits Budget announcements later this month, with industry observers watching for any signals on tax policy direction that could affect transaction volumes and development activity.