UK has highest property taxes in developed world

UK property taxes now account for more than 10pc of total tax revenue. Photo / Getty Images

The squeeze by the UK Government on home owners and business premises means Britain has the highest property taxes in the developed world, it has been revealed.

Analysis by the Organisation for Economic Co-operation and Development (OECD) shows property taxes accounted for 12.7pc of the total tax burden in 2014, the latest year for which data are available. This is up 0.3 percentage points compared with 2013 and is more than a percentage point higher than in 2011.

It means levies on property as a share of total taxation are higher in the UK than anywhere else in the developed world. At 5.6pc, the average among the OECD's 35 members is less than half the UK figure.

Britain is also bucking international trends. Since 1965, the international average has fallen from around 8pc, while the UK Government has increasingly relied on property taxes for its income.

UK property taxes now account for more than 10pc of total tax revenue in just four other countries apart from the UK: Australia, Canada, South Korea, and the US.

In 2014, UK taxes on residential and commercial property, including stamp duty, inheritance tax and business rates, jumped to £74.2b in 2014, up from £69.8bn a year earlier.

The increase pushed up levies both as a proportion of the Government's total tax take and national economic output, with property taxes now representing the highest share of the tax burden in at least 35 years.

Revenues from stamp duty climbed to 2.4pc of the UK's total tax take in 2014, from 1.62pc in 2011, the OECD's latest revenue statistics bulletin says.

Property taxes are equivalent to 4.1pc of GDP in the UK, against 3.9pc of GDP in France, 2.8pc in the US and 1.9pc across the OECD.

While the former Conservative Chancellor of the Exchequer, George Osborne, took steps to reform property taxes, research has shown that changes have slowed the housing market and raised half as much money as the Treasury predicted.

Many companies have warned about the negative impact on the economy of Britain's sizeable business rates bill, which has grown from being the seventh largest revenue raiser for the Treasury in 2010 to the sixth largest today, amid a prolonged freeze in fuel duty.

Higher than usual numbers of homes available to rent have boosted tenants' negotiating power. Stock growth has outstripped that of tenants.

Mark Rigby, chief executive of CVS, the business rent and rates specialist, said:

"Theresa May's Government has the aspiration to cut corporation tax to the lowest level in the G20, but what we need more than ever, given the current and future challenges facing the economy post-Brexit, is competitive property taxes so as to ensure we are well and truly 'match fit'."

The rising tax burden on British property owners appears to be benefiting renters in the London market, at least briefly. New figures show more properties have been made available to rent after the stamp duty rise in April. In London, buy-to-let landlords rushed to beat the increase by purchasing more properties before the deadline.

Johnny Morris, research director at Countrywide, said: "Higher than usual numbers of homes available to rent have boosted tenants' negotiating power. Stock growth has outstripped that of tenants."