Chancellor Rishi Sunak’s stamp duty holiday means prime property in the UK now enjoys lower tax rates than most European countries.
Buyers pay just 1.93 per cent of the property’s value in tax compared to the European average of 4.53 per cent shows a new study by UHY, an international accountancy network.
The study - working in US dollars - shows that a homebuyer in the UK pays just $19,300 in stamp duty on a purchase of a home worth $1m compared with a European average of U$45,294.
The firm says the effective stamp duty rate was three per cent on average before the holiday was announced; globally, buyers pay an average of 4.5 per cent on the purchase of a prime $1m property.
UHY explains that although the stamp duty cut will help ordinary people buying lower-value properties, it does leave buyers of properties worth $2m and up paying more tax in the UK than in most other countries.
Homebuyers of a property worth $2m still pay 5.78 per cent in stamp duty, putting the UK ahead of Germany (5.38 per cent) and Italy (0.63 per cent) and an average for the US of 0.39 per cent.
UHY says many overseas high net worth investors have been attracted to London in recent years and are now substantial investors in the UK economy. There are fears that the UK could become less attractive to this group, through increasing taxes and this could have a disproportionately large impact on economic growth and job creation in an already-challenging period for the UK.
Andrew Snowdon, head of tax at UHY Hacker Young, says: “Cutting taxes on property purchases in the UK will hopefully improve confidence in the market, as property price growth has slowed since the Brexit referendum and been hit hard by Coronavirus.
“However, the UK’s stamp duty regime is still tougher on super-prime properties. For the government to charge over $100,000 on a $2m home is seen as harsh by many, especially if they are then charged the second home or overseas investor surcharges on top.
“While it’s great for working families to have zero stamp duty, when the housing market has shown little growth for several years the government should consider a cut to bring higher net worth investors back into the market in greater numbers. The UK benefits from their spending and investment.”
UHY’s study also shows that several major developed economies now charge tax worth more than 10 per cent on the purchase of a home worth just $150,000, including Belgium (11.66 per cent) and Japan (11 per cent).