Budget 2012: Osborne to tax the rich through stamp duty
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.
A hugely unpopular tax paid on property and share purchases. Stamp duty on property is levied at 1% for purchases over £125,000 (£250,000 for first-time buyers) which then moves up at a tiered rate. For property between £125k and £250k you pay 1%, then 3% from £250k up to £500k and then 4% from £500k to £1m and then 5% for properties over £1m. But unlike income tax, which is “tiered” and different rates kick in at different levels, stamp duty is a “slab” tax where you pay the rate on the whole purchase price of the property. On shares, stamp duty is charged at a flat rate of 0.5% on all share purchases. Figures correct as of May 2011.
The practice of locating your financial affairs (banking, savings, investments) in a country other than the one you’re a citizen of, usually a low-tax jurisdiction. The appeal of offshore is it offers the potential for tax efficiency, the convenience of easy international access and a safe haven for your money. However, offshore is governed by complex, ever-changing rules (such as 2005’s European Union Savings Directive) and, as such, is the exclusive province of the wealthy and high-net-worth individuals.
Everything you own: all your assets (property, cars, investments, savings, insurance payouts, artwork, furniture etc) minus any liabilities (debts, current bills, payments still owed on assets like cars and houses, credit card balances and other outstanding loans). When you’re alive this is called your wealth; when you’re dead, it becomes your estate.