The 2012 Budget: will it affect you?
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meeting in progress On 21st March, the Chancellor of the Exchequer announced the Government’s 2012 budget, which includes a range of reforms to the tax system. (read on to find out more)
As with most Budgets, there is good and bad news for residential property: various measures were announced to attempt to revitalise the UK housing market, and the Chancellor has backed up his pre-budget promise to crack down on tax avoidance schemes, targeting in particular the acquisition of residential property via corporate vehicles. All of these changes will have an impact on homeowners and aspiring homeowners across the country and so we have put together the following overview to help you understand how your next property transaction might be affected.
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7% stamp duty
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A new 7% rate of Stamp Duty Land Tax (SDLT) has been introduced for residential properties sold for over £2 million, with immediate effect. This tax will also affect individual investors as it applies to single or linked purchases of up to five residential properties by individuals or companies, where the aggregate priced paid exceeds £2 million. The 5% rate for properties sold between £1 million and £2 million remains.
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15% stamp duty for corporate purchases
A new 15% Stamp Duty has been applied, with immediate effect, to residential properties purchased for £2 million or more via ‘non-natural persons’ - i.e. companies and collective investment schemes like unit trusts, or partnerships which have a nonnatural person as a member.
meeting in progress stamp duty holiday
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The stamp duty holiday that was introduced for first time buyers in 2010 ended on 23rd March as the Government said it had been ineffective in helping people to buy.
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new buy guarantee scheme
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In place of the stamp duty holiday, the Government launched the Newmeeting Buy Guarantee inscheme on 12th March 2012, which it hopes willprogress be better at getting people on to the housing ladder. This scheme will see the government and major house builders guaranteeing part of the loan from banks to first-time buyers, allowing people to buy a new home with just 5% deposit.
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inheritance tax
From 6th April 2012, a lower rate of IHT of 36% (compared to the normal 40%) will be available if 10% or more of a deceased person’s net estate is left to charity.
closing loopholes
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Although the finer details are yet to be confirmed, the Government has taken steps to close a number of tax loopholes, including the introduction of:
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will • A statutory definition of residence status for tax purposes from 6th April 2013.
• Legislation on Inheritance Tax to close an avoidance scheme involving the acquisition of interests in offshore excluded property trusts • Legislation to counter avoidance involving losses from a property business set against general income from 13th April 2012. • The extension of Capital Gains Tax liability (CGT),£ from April 2013, meeting in 5 to UK residential properties (and shares or interests in residential progress property) held by non-UK £ resident non-natural persons. %
other measures currently in consultation
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• The introduction of an annual levy on ownership of residential properties above £2m within corporate vehicles from April 2013
• Simplification of the calculation of Inheritance Tax (IHT) charges to which trusts are subjected at 10-yearly intervals and when property is transferred out of the trust. • Simplification of the regulations regarding REITs to make them more attractive for investors.
With an international network of over 70 offices, an extensive market knowledge and wealth of experience, Chesterton Humberts is ideally placed to help you with all your property needs.
If you would like to talk to us about your next move, please contact your local office on: T: 0203 040 8339 E: valuations@chestertonhumberts.com
chestertonhumberts.com The information contained above is of a general nature for guidance purposes only and is not a substitute for professional advice. Before acting, or refraining from acting, you are recommended to obtain bespoke tax / legal advice in relation to your personal circumstances from a qualified tax / legal adviser. Accordingly, Chesterton Global Limited and/or its agents cannot be held responsible for any loss as a result of acting or refraining from acting in relation to the information given.