The full impact of George Osborne’s Stamp Duty hikes plus introductions of a property wealth tax and Capital Gains Tax for super-rich buyers in last year’s Budget will not be known for months, it has been predicted.
Property fund London Central Portfolio said that inevitably the taxes are a tax on London, where 77% of £2m-plus properties are located – although it points out that sales outside the capital have been hit badly.
In the March Budget, Stamp Duty was raised to 7% (from 5%) for properties over £2m. According to the Land Registry, sales outside central London in the £2-£5m sector decreased by 53%.
The Chancellor also introduced a Stamp Duty charge of 15% on properties over £2m bought through a company and revealed plans for an annual levy, now called the Annual Residential Property Tax (ARPT), as well as a CGT charge on their sale.
An exemption on the new 15% rate will be if the property is bought for rental investment purposes – but it is not clear whether this exemption will be implemented at the beginning of the new financial year in April or when Royal Assent is granted in July.
Naomi Heaton, chief executive of London Central Portfolio, said that as a result, corporate buy-to-let investors with budgets of over £2m will hold back on purchases in the first half of the year, waiting for the 15% Stamp Duty exemption to apply.
Heaton said that the new 15% Stamp Duty for owner-occupiers buying through companies, together with the introduction of the new property wealth tax, ARPT, next March and anticipated Capital Gains Tax (still under consultation) will result in falling transactions and stagnant prices.
She said that this will be particularly evident in the first half of the year as buyers review their tax positions and work out new strategies. They will need to weigh up the cons of purchasing through a corporate vehicle versus the pros of IHT savings and personal privacy.
Comments