Evaluation of LTT forecasts

Table A shows that LTT receipts in 2024-25 were £97 million (40 per cent) higher than we expected in our February 2024 forecast. Most of this difference is explained by stronger-than expected residential transactions and prices. This is labelled as ‘economic determinants’ in the table. In Chart A we compare changes to 2022-23 as this is the year that the model was based on at the February 2024 forecast, meaning it is the changes since then that are relevant. As Chart A shows, we forecast that the total value of residential transactions would fall cumulatively by 27 per cent between 2022-23 and 2024-25, but instead it only fell by 5 per cent. The forecast for house prices and transactions was based on our November 2023 EFO forecast, in which we expected a significant decline, reflecting the higher outlook for mortgage rates, low transactions outturn and weak market indicators. As a result, transactions and prices were expected to continue declining into 2024-25. However, the housing market recovered from this shock faster than forecast.

Commercial property receipts were £23 million (36 per cent) higher than expected. 90 per cent of this is explained by modelling. This is because there were a few unusually large commercial transactions in 2024-25 and because outturn was higher in the final quarter of 2023-24 than expected, information that was not available at the time of forecasting.

Changes from policy were relatively minor, with higher rates increased in December 2024 which was not known at the time of forecasting.

Table A: Land transaction tax receipts in 2024-25: forecast versus outturn

Chart A: Property prices and transactions: changes between 2022-23 and 2024 25 forecasts versus outturn