Currently, the UK imposes a 2% surcharge on home purchases in England and Northern Ireland if the buyer lacks citizenship or residency. This rate pales in comparison to Australia, where non-resident excise taxes reach 15% in some states, or Canada, where they can skyrocket to 25%.
Last Spring, the Labour Party said it would consider increasing the surcharge on foreign buyers. A 25% tax on purchases by foreign buyers could potentially yield an annual revenue of £855m, the SMF suggests.
A vacant home tax could also generate a lot of money. Estimates suggest there are approximately 1.5 million vacant properties across the UK. A mere 1% value tax could inject billions into the Treasury. Australia and Canada have adopted similar measures, levying taxes of up to 3% on vacant properties.
Australia and Canada also fully tax gains made from the sale of a property if it is sold within a year of the purchase, essentially denying sellers the benefit of capital gains tax exemptions.
This tax is meant to discourage ‘house flipping’. If the UK implements it, the tax it would apply to 2.3% of home sales. A 50% tax on the profits from house flipping in the UK would raise £550m per year.
These objectives do not seem to increase housing supply, the SMF cautions. However, they have been effective at raising money. The revenue could be spent providing, for example, council tax rebates to private sector renters to help them save for a deposit, thus improving their chances of getting on the housing ladder, the SMF said.
Housing crisis: How many homes are empty in the UK?
1.5 million homes are “vacant” in the UK – not occupied a majority of the time. Some 261,189 properties are “long term empty” – meaning no one has occupied them for more than six months. That figure represents a rise of 12,556 homes compared to 2022, up 5% annually and 16% since before the pandemic in 2019.
Speaking to the Big Issue last year, Rebecca Moore, Action on Empty Homes director, said: “It beggars belief that while children are growing up sharing beds in temporary accommodation, our nation has over a quarter of a million homes sitting empty. To say this is a national disgrace is a profound understatement.
“Long-term empties are a huge missed opportunity to invest in green retrofit and create new jobs.”