The Inside Edge
The Chancellor George Osborne has confirmed plans for a 7% Stamp Duty on properties purchased for over £2m while at the same time, he announced that the coalition government was planning a crackdown on methods employed to avoid Stamp Duty payments.
At first glance, it would appear that the higher level of duty applies to such a small proportion of property buyers that it isn’t anything to be concerned about but the clear aim behind the Chancellor’s statement is to have the brunt of Stamp Duty carried by those who can afford to buy homes at this level.
“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.
He went on to confirm the plans will be put in place to stop the rise in practises used to avoid higher rates of duty. A popular method was to negotiate a lower sale figure before pushing up the price via the purchase of ‘chattels.’ Additionally, some properties over the £2m mark were being purchased via a limited liability company before selling on to an individual. The Chancellor announced that any properties bought through a company would now be subject to a 15% Stamp Duty charge.
While it may be fair to say that the number of buyers able to afford such properties represents a small percentage of the UK public, the figures involved in such sales are obviously significant and aid the property market as a whole. What effect therefore will this higher rate of duty have over time?
Figures released last week by the Land Registry are suggesting that sales of £2m plus properties are already tumbling. The figures confirm that in December 2011, 103 such properties were sold across the UK and that represented a fall of 18% from the same month in 2010.
These statistics were of course, produced for a period prior to the increase in Stamp Duty so could we expect falls of even greater percentages?
Property experts have been slow to comment on the Land Registry findings but there is concern that another element of the Budget will have a severe effect on sales to Overseas Property Investors. From April 2013, those investors will have to pay Capital Gains Tax.
“This can only make the UK less attractive to overseas investors,” said Toby Ryland of accountants Blick Rotherberg.
These are tough measures indeed but how much effect will they have on the overall property market?