Budget 2012: New stamp duty plans are outlined

 

Stamp duty rate rate rise on £2m plus properties

Properties sold for more than £2m will be subject to a new 7% stamp duty charge, Chancellor George Osborne has confirmed.

Mr Osborne also said that stamp duty on residential properties over £2m which were bought via a company would increase to 15%.

The chancellor said that those who bought the most expensive homes should contribute more.

He also wanted to tackle tax avoidance when people bought homes.

Millions raised

"It is fair when money is tight, and so many families could do with help, that those buying the most expensive homes contribute more," Mr Osborne said.

There are various rates of stamp duty land tax - paid by the buyer of a property - already in place, depending on the cost of the home.

Current stamp duty thresholds

  • 1%: Properties of £125,000 to £250,000, but first-time buyers are exempt until 24 March
  • 3%: £250,000 to £500,000
  • 4%: More than £500,000
  • 5%: More than £1m, residential property only

The changes, which take effect at the end of the day, only affect a relatively small proportion of home buyers.

The latest statistics from the Land Registry showed that, in November 2011, there were 121 homes sold for more than £2m in England and Wales. That accounted for just 0.2% of the 57,967 homes sold that month.

Of these 121 homes, 98 were in London.

However, the move is predicted by the Treasury to raise £150m in the next financial year, rising to £300m by 2016-17.

Avoidance

The government wants to put a stop to the way some people have avoided paying stamp duty.

There are two popular methods. One was by paying for chattels - fixtures and fittings - separately and, as a result, bringing the cost of the actual property below the £125,000 threshold.

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The second was by setting up a limited liability company to buy the property, which then immediately sold it back to the individual, or which pushed up the price when selling on to the next buyer. This is done by the owner selling shares in the company rather than the property itself.

The second method is the one that the chancellor is keen to clampdown on.

He has announced that the level of stamp duty on residential properties over £2m which were bought via a company would increase to 15% with immediate effect.

In addition, overseas companies that already own UK residential property worth more than £2m will be subject to capital gains tax from April 2013.

"This can only make the UK less attractive to overseas investors," said Toby Ryland, a senior tax partner at accountants Blick Rothenberg.

 

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  • rate this
    +5

    Comment number 9.

    People who have bought houses through companies can afford accountants who will just point them to the next loophole, perhaps some sort of trust structure, until that loophole is closed. But announcing a 'tax on the rich' is good PR/soundbite for the government.

  • rate this
    0

    Comment number 8.

    #1 - HaveIGotThatWrong
    5 Minutes ago

    Yes you have.

    Employee contributions in tax year from next month to April 2013 start at £146 per week and emplyer at £144 - in both cases just over £7k per year. This will surely go up again from 2013.

  • rate this
    -10

    Comment number 7.

    Cheers George, thanks for your knickers.

  • rate this
    0

    Comment number 6.

    I can't wait for the predictable comments that this makes Britain "anti business" from the usual suspects. As they can pay clever accountants and lawyers to find the inevitable loopholes I doubt it will actually have more than symbolic effect. Meanwhile the great unwashed will go on paying tax through the nose at every turn.

  • rate this
    +3

    Comment number 5.

    I've been saying for ages that they should introduce a higher tax rate for $2 million+ properties. However, my justification for this was that stamp duty should be changed to a gradual system with the relevant rates only applying to money above the limit - like income tax. The higher tax rate at the top end was to counteract the money lost in stamp duty with such a system in the low end.

  • rate this
    +20

    Comment number 4.

    Disappointed on fuel duty, but ok with the rest.

    I do wish he had addressed the loophole allows foreign nationals who work here to claim child support for their children living at home. That is an unacceptable loophole that should be closed.

  • rate this
    +1

    Comment number 3.

    1. HaveIGotThatWrong

    Unless of course you are earning over £42,850 pa. Then the NI above that is 2%

  • rate this
    +2

    Comment number 2.

    An extra £91 per month will make a big difference to a lot of people, a few more pct on people buying £2m homes probably won't. Although a good compromise budget from Osborne, I can't help but feel that the squeezed midddle are being ignored again.

  • rate this
    +2

    Comment number 1.

    It’s all very well increasing the personal tax allowance to over £9k, but you still have to pay 12% NI on income over £5k ( and your employer pays 13.8% NI as well ).

    So millions are still paying income tax, it’s just that it’s called National Insurance, but, as we all know, it’s still really Income Tax by another name.

    Why is it that all Governments refuse to see NI as tax ?

 

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