Budget 2014: Stamp duty clampdown on rich property-buyers
Chancellor George Osborne has vowed to put an end to the abuse of the residential property market by the rich buying expensive homes through companies.
From midnight on 19 March 2014, any purchase of residential property worth £500,000 or more made through a company will incur Stamp Duty at 15%.
The change is in response to government estimates that suggest around 5,000 homes are registered as being owned by companies in such a way that the owners avoid stamp duty and inheritance tax.
The homes bought are mainly in London and some are worth millions of pounds – £1.6 billion worth of these properties were bought in the last year alone, according to the Independent Newspaper and the Exaro website.
However, despite broad support for the rule change from property experts, many were disappointed that the chancellor didn’t implement further changes to Stamp Duty – specifically an increase to the £250,000 property price threshold at which the 3% rate of tax kicks in.
Paula Higgins, chief executive of the HomeOwners Alliance, said: "The chancellor chickened out on much needed reform."
She explained: "Stamp duty will treble over the next five years. The housing market is being hammered as the government is addicted to stamp duty. The astonishing rise in stamp duty has resulted in government turning a blind eye to hardworking families.
"What we didn't hear in the speech is that the government collected £6.9 billion in stamp duty in 2012/13, and will double this by 2015/16; and triple its takings by 2018-19 to a whopping £18.1 billion."
"By 2018, this will be nearly twice the amount raised from tobacco… The chancellor boasted in his speech that he was raising tax on tobacco, but it is really the homeowner that he is milking."
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 tax levied on the total value of your estate after you die. IHT has to be paid by the beneficiaries of your estate before they can receive any of the money from it. The money can’t be taken from the value of the estate _– it has to be paid before any money can be released. There is an IHT threshold – known as the “nil-rate band” – below which no tax is levied (£325,000 in 2011/12). Any amount above the nil-rate band is subject to tax at 40%. If your estate totals £600,000, there is no tax on the first £325,000; however your estate will pay 40% tax on the remaining £275,000, a total of £110,000. Prudent tax planning can reduce your IHT liability, so always consult a specialist solicitor.