The Treasury Select Committee – a cross-party group which examines the expenditure, administration, and policy of the treasury, HMRC, and associated public bodies – has released a report into last year’s Autumn Statement which criticises the stamp duty surcharge on buy-to-let properties, which becomes effective from April.
The new tax is described as “inefficient,” citing the Mirrlees Review and industry experts who agree the new measures will result in distortions in both the housing and labour markets. It will likely reduce the supply of private rented properties, leading to higher rents.
It is further argued that the wider economy could well be damaged as an unintended consequence, as choking off the supply of rented homes will reduce labour mobility, thus reducing the overall efficiency of the overall labour market. It also revealed that, although the Office for Budget Responsibility forecast a £3.8bn increase in tax revenue, the effect of the tax on the market makes this costing highly uncertain.
The committee stressed that the chancellor’s goal of increasing home ownership should not come at the expense of the private rented sector.
The report concludes that there are serious concerns about the “fairness” of the tax, as it breaches the policy of treating all taxpayers equally, and that it could result in instability in the buy-to-let market.