Budget 2012: Osborne to tax the rich through stamp duty

Last updated: Mar 21st, 2012
News by Ruth Jackson
houses with £10s

Stamp duty on housing transactions worth over £2 million will increase to 7%, it was revealed in today's Budget.

At present, all properties worth over £1 million are liable to 5% stamp duty when purchased.

But from midnight tonight stamp duty will rise to 7% on properties worth over £2 million, meaning purchasers will have to hand over at least £140,000 to the taxman.

HM Revenue & Customs have announced that anyone who has already exchanged on a £2m purchase but not yet completed won't be hit by the new rate.

The increase comes just 12 months after the Treasury introduced the 5% stamp duty rate – up from 4%.

However, the change is likely to affect only the rich. On average, 67,000 homes are bought each month in England and Wales, and of those only 95 are worth over £2 million.

"Few parts of the Budget smacked of such naked tokenism as the new top rate of stamp duty," says Russell Quirk, director of estate agents eMoov.co.uk.

"The extra tax revenues generated by the new 7% rate will be small, given that these super-prime homes are such a small proportion of the market."

He adds: "But if his fiscal case is shaky, the Chancellor's political calculations are flawless. Much of the pain of the new top rate will be felt by wealthy foreign buyers, who can't vote in Britain."

Stamp duty loophole closed

As well as increasing the top rate of stamp duty, Osborne also moved to dramatically reduce stamp duty avoidance.

At present, some wealthy homeowners try to avoid stamp duty by buying residential property through an offshore company.

However, Osborne has brought in a 15% stamp-duty rate on corporate purchases of properties worth more than £2 million with immediate effect, which all but eliminates the attractions of purchasing property through a company.

"I can't help but feel sorry for the people who genuinely have to buy a big property in a company name. Unless you happen to be able to complete by midnight tonight I must assume those deals will fall through. A 15% rate is just absurd and a cack-handed political gesture to the Lib Dems," says Ed Mead director of Douglas & Gordon estate agents.