The basis on which stamp duty is charged is being changed in a move that will benefit most purchasers of property.
The old system applied a single rate of stamp duty to the sale price, based on the value of the purchase. Because of the way in which this was tiered, it led to some creative apportionments of the purchase price between the property itself (subject to stamp duty) and the contents (not subject to stamp duty), as an adjustment of the proportions of just a few pounds could lead to a reduction of thousands of pounds in the total cost to the buyer.
Under the new system, stamp duty will be payable in ‘slices’. There will be no tax payable on the first £125,000 of the selling price, a 2 per cent charge on the next £125,000 and so on. The top rate of stamp duty (12 per cent) will apply to the slice of consideration above £1.5 million.
The move will see a reduction in the stamp duty payable on the large majority of property sales, but will create considerably higher liabilities on purchases of the highest-priced properties.
The higher charges will be felt particularly by purchasers of properties in the more affluent areas of London, where many of the ‘top end’ properties are bought by foreigners. These purchasers will also be hit by the proposal to charge Capital Gains Tax (CGT) on the surpluses on sales of properties owned by non-UK residents by the removal of the option to elect which one of two (or more) properties is to be treated as the ‘principal private residence’ of the taxpayer for CGT purposes. This option will no longer be available unless the property has been occupied for at least 90 nights a year.
The rule will also apply to the foreign properties of UK residents.