Monty's Mortgage Blog
Stamp Duty Jumps For High Net Worth Buyers
21st March 2012
After being faced with probably the most leaked budget in the history of budgets, Mr Osbourne nonetheless delivered with a certain amount of verve and confidence.
Whilst much was all as expected things did seem to get rather interesting from a property perspective when the subject of stamp duty was broached, where the real surprise was lurking.
The 7% on properties above £2m was widely expected, but the tax on those purchasing via a company was the big surprise, at a whopping 15% with the promise of further “measures”.
As for the basics this represents a big step in the Chancellors move from taxing income to taxing wealth, with the “fiscally neutral” budget paving the way for a reduction in the 50p tax rate to be financed above and beyond by the Stamp Duty changes.
I can’t help feeling however that this was an opportunity missed to fundamentally overhaul Stamp Duty properly. By charging Stamp Duty in a similar way to income tax this could have worked in a much fairer way, helping those buying at the lower end such as First Time buyers with a lower rate and gradually tierring upwards to potentially an even higher rate, even 10%, at the top end. This way both ends of the spectrum would be more willing and able to pay.
Just adding a further “slab” and charging 7% on the whole amount will only serve to encourage Stamp Duty Mitigation Schemes and avoidance measures however tough the Chancellors words.
Either way, in retrospect this is a better suggestion than the dreaded Mansion Tax which could target the wrong people entirely!
The main issue, as I glance down to see my client frantically calling me who is purchasing at just over £2 million, is that in setting the deadline to midnight tonight to exchange, there will be those who have incurred substantial expense based on one idea of costs, who will have to suddenly find a load more cash to actually complete.
This seems crazy to me and even a months deadline would have avoided issues. People underestimate how much the wealthy help the economy and driving them away suddenly is not the answer.
The big move is where properties bought in a company name is concerned. Setting the rate at 15% for properties bought in this manner is actually a clever move and should kill off this practice stone dead.
However, the devil is in the detail and many foreign buyers purchase properties for investment purposes rather than to live in, so it is unclear if these will escape or not. I sense a loophole!
It also does not address those properties already held in company names, although this will be consulted on, with Capital Gains Tax one change mentioned. How the Chancellor proposes to charge Companies who are purchasing the share capital of other companies that hold a single property remains to be seen.
Anyway, I am properly budgetted out now so glad to get back to the day job, whatever that actually is…
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Andrew Montlake, Director and Spokesperson for Coreco, gives his honest and forthright views on the mortgage market, economy and all things property related. Monty was voted "Mortgage Personality of the year 2008" and is the current holder of the British Mortgage Awards "Best Press Spokesperson" title. Expect expert analysis, delivered in a down to earth style with a side helping of exuberance.