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New Stamp Duty Rules

http://i.telegraph.co.uk/multimedia/archive/02174/osborne_2174950b.jpg

Following the latest budget, the Government has outlined its planned modifications to the stamp duty system.  Properties sold for more than £2m will now be subject to a charge of 7% of the purchase price.  This will represent an extension to the current stamp duty thresholds, where residential properties over £1m are liable for 5% stamp duty.  In addition to this, those buying properties for over £2m via a company will now pay 15%.

The Chancellor, Mr Osborne, said that those who bought at the top end of the market should contribute more: “It is fair when money is tight, and so many families could do with help, that those buying the most expensive homes contribute more.”  The move is predicted to generate an additional £150m for the treasury in the next financial year – rising to £300m by 2016-17.

The change will only affect a small number of house buyers; Land Registry figures for November 2011 show that there were only 121 homes sold for more than £2m in England and Wales.  That is just 0.2% of the total 57,967 houses sold that month, and of those 121, 98 were in London.

In addition to this new extra tier of high-level of stamp duty, the chancellor is clearly keen to close some loopholes.  One popular way of stamp duty avoidance was to set up a limited company to buy the property, which immediately sold it back to the individual, or which pushed the price up when selling on to the next buyer – done by the owner selling shares in the company, rather than the property itself.  From now on, those buying properties for over £2m via a company will now pay 15% stamp duty.

Also, overseas companies that already own UK residential property worth more than £2m will be subject to capital gains tax from April 2013.  A somewhat controversial move for the chancellor, as it could well make the UK less attractive to foreign investors.

 

New Stamp Duty Thresholds for Residential Property Purchase

Purchase Price

Stamp Duty Payable

£125,000 to £250,000

1%

£250,000 to £500,000

3%

£500,000 to £1,000,000

4%

£1,000,000 to £2,000,000

5%

Over £2,000,000

7%

 

Sources: bbc.co.uk, hm-treasury.gov.uk (image courtesy of telegraph.co.uk)