Stamp duty tax take up £300m in rush to beat deadline

Will Drysdale, Senior Reporter, Business & Accountancy Daily

Tax receipts are up 5.3% so far on the year but almost £300m more has been paid in stamp duty land tax this February than last while inheritance tax was up 12%

One of the major hikes in tax revenue came from property sales. Stamp duty land tax (SDLT) was up 20% to £1.05bn in February alone, compared with £781m in February 2024. So far this tax year property tax has soared to £12.4bn, up from £10.7bn the previous year.

The main reason for the huge rise in SDLT receipts is due to the end of the frozen stamp duty thresholds on 1 April, which are less than 10 days away. The level of sales has been driven by first time buyers trying to beat the end of the £250,000 tax-free SDLT threshold.

Matthew Todd, associate director at RSM said: ‘Looking at SDLT, in isolation, we have seen significant changes in the current tax year, including the abolition of multiple dwellings relief and an increase to the higher rate for additional dwellings or ‘second home’ surcharge from 3% to 5%.

‘However, further changes are on the horizon, with the temporary extension to the SDLT nil-rate band coming to an end on 31 March 2025, which will increase the SDLT cost of all purchases for consideration in excess of £125,000 by up to £2,500.

‘First-time buyers are more significantly impacted by this change and may see an increase to SDLT on qualifying first-time purchases of up to £6,250. As falling borrowing costs may breathe extra life into the property market HMRC may see a further boost to SDLT receipts.’

Figures for March are likely to be even higher as buyers race to close transactions by the end of the month. Rightmove also does not expect there to be a reduction in activity after April, due to high property demand.

Total tax receipts in February were £68.8bn, £2.5bn higher than February 2024 while the total amount from April to February is £25.5bn higher than the same period in 2023-24.

A total of £787.2bn has been collected so far.

Inheritance tax continues to go through the roof, up 11.8% in 2024-25, with £7.6bn paid by estates, and £800m more than the same period in 2023-24.

February alone saw £612m paid in IHT, 8.5% higher than one year ago and the first time IHT receipts have topped £600m in the month of February.

Ian Dyall, head of estate planning at Evelyn Partners said: ‘Property and investment assets continue to grow in money terms so that more modest estates in real terms are exceeding the frozen nil-rate bands, and those nil-rate bands start to look less meaningful for larger estates, protecting an ever-smaller proportion of them against IHT.’

Income tax, capital gains tax (CGT), and national insurance contributions (NICs) were £15.5bn higher in February at £448bn, with PAYE and NICs receipts accounting for £384.9bn of the total tax take, £12,6bn higher than the same period in 2023-24.

However, self-assessment income tax was almost £400m lower than February 2024, while CGT has was down by almost £600m, with these figures skewed by the surge of asset sales around the Budget last autumn.

Shaun Moore, tax planning expert at Quilter, said: ‘The long-term trajectory of CGT revenues underscores its growing role in the Treasury’s tax strategy.

‘A decade ago, CGT receipts stood at just £3.91bn per year; they have soared to nearly £10bn more per year. Successive governments have used a combination of lower allowances and higher rates to steadily expand the number of people affected.

‘However, the surge in CGT receipts may not be permanent. The higher rates create a strong incentive for investors to defer sales, avoiding tax where possible.’

VAT was up substantially by £950m in February to £16.2bn alone compared to February 2024, which could be influenced by private schools having to charge 20% VAT on their fees from 1 January 2025.

Tom Goddard, a senior associate at Blick Rothenberg, said: 'VAT receipts have gone up by 15% over the last 2 years. Although the Chancellor might claim this is because of her decision to introduce VAT on private school fees, the increase in VAT tax revenues appears to be due to inflation driving up the underlying prices on many VATable products and services over the past 24 months.

'Corporation tax receipts are also continuing to increase and are now almost 9% higher than they were in the 12 months to February 2024.'