Declining property values have impacted Government finances, driving them to look elsewhere for revenue. With no changes to land tax rates in sight, it is expected that an increasing number of land owners will be brought into the land tax net to make up for declining stamp duty revenue, particularly once property values recover.
The Government has forecast a decline in land tax revenue in 2019/20 by 0.35%, even after taking into account the increase in the Absentee Owner Surcharge rate from 1.5% to 2%, and taxing owners of land contiguous to their principal place of residence.
What will an annual property revaluation mean for land owners?
From 1 January 2019, property revaluations are being undertaken annually, rather than the current biennial revaluation, for ratings and land tax calculations. The first land tax assessments based on annual revaluations will be issued in the 2020 land tax year.
While the move from biennial to annual revaluations may be intended to increase land tax revenue based on an assumption of ever increasing property values, land owners who have been impacted by the recent decline in property values are expected to be the real winners when the 2020 land tax assessments are issued.
Land tax to make up for declining stamp duty revenue
It is clear that the Government expects to make up for the lower than expected stamp duty revenue through increased land tax revenue.
In the 2017/18 and 2018/19 Budget estimates, stamp duty accounted for 28-29% of the total tax revenue, with land tax accounting for 11-12% of the total tax revenue. The Government’s latest estimates provide that revenue from stamp duty will only account for 24-25% of the total tax revenue. However, the estimates also provide that revenue from land tax will now account for 15-16% of the total tax revenue.
If the forward estimates are to be relied upon, land owners should expect higher land tax bills from the 2022 land tax year onwards.