Reading the speculation leading up to the 2015 budget over the last few weeks, I was struck by how strongly property featured, not only in discussions about tax, but in the news generally. Hardly a day goes by without another set of house price statistics, or story about how young people find it difficult to get on the housing ladder. The Chancellor has brought us the Annual Tax on Enveloped Dwellings (“ATED”), crackdowns on Stamp Duty Land Tax avoidance, a change in the basis of SDLT, Capital Gains Tax on foreign residents, the Help to Buy scheme and, now, the Help to Buy ISA. Once, the budget centred on income tax, booze and fags. Now, it sounds more like a West London dinner party: all clever in-jokes and house prices. Nor is the UK unique in this. Why?
The short answer is that governments are running out of money, and running out of things to tax. As public spending has increased over time, the means to pay for all those electoral promises have been stretched further and further. Income is already taxed heavily by historical standards, directly, and indirectly. Corporate profits are taxed whenever governments can track them down (which gets increasingly difficult). Import duties are out of fashion in a world of trade blocs and international free trade agreements. So where can a poor Chancellor turn? The obvious target is that big store of value that the wealthy cannot hide or move across international borders – property. Whether or not we get a mansion tax (originally a Lib Dem policy but now adopted by Labour), or a widening of Council Tax Bands (as now seems the Lib Dems’ preferred option), this trend looks set to continue. As property prices continue to rise, the temptation to raise revenue from them seems likely to increase. Although the Conservatives have, so far, taken a less hostile line than other parties (and, if one of the pre-budget leaks is to be believed, are considering a further tax change favouring property ownership in the form of a “main residence nil rate band”), they will have to meet those ambitious targets for cutting the deficit somehow so, if you are a property owner, you have been warned!