The Chancellor has confirmed in the Budget that homes worth more than £2m will face a new Stamp Duty rate of 7 per cent, with 15 per cent levied on homes over £2m bought through a company.
The 15 per cent stamp duty will be effective immediately and aims to close down a loophole whereby properties owned by companies do not face stamp duty when sold.
Chancellor George Osborne has also announced it plans to consult on introducing a “large annual charge” on £2m homes which are already bought through companies.
Osborne said capital gains tax will also apply on residential properties through overseas companies, to ensure wealthy non-UK residents have to comply with the changes.
The Government has also issued legislation to close a loophole which allowed people to avoid stamp duty through sub-sales relief by putting their home in a trust.
Osborne said: “Let me make this absolutely clear to people. If you buy a property in Britain that is used for residential purposes, then we will expect stamp duty to be paid. That is the clear intention of Parliament.
“I will not hesitate to move swiftly, without notice and retrospectively if inappropriate ways around these new rules are found. People have been warned.”
Currently Stamp Duty kicks in at £125,000 and is charged at 1 per cent, rising to 5 per cent on properties worth over £1m. Rules around sub-scale relief have been exploited which were put in place to stop developers paying stamp duty twice. Once the home is bought it is transferred to a trust at a value below the £125,000 stamp duty threshold.
Osborne also spoke out against the practice of high earners finding ways to avoid paying tax.
He said: “It was the boast of some high earners that they were paying less tax than their cleaner. I regard tax avoidance as morally repugnant.”
Osborne said the Government will consult on introducing a general anti-avoidance rule in the UK, with the aim of bringing in legislation through next year’s finance bill.
The stamp duty move is part of a compromise between the Coalition parties to deliver a quicker rise of the personal allowance towards £10,000.
The rise in Stamp Duty will mean that the minimum tax on a property worth more than £2m will rise from £100,000 to £140,000. Stamp Duty on a property worth £5m will rise from £250,000 to £350,000.
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