Autumn Statement: Reform of structure Stamp duty land tax and Non-domiciled individuals

In his Autumn Statement today George Osborne made the following announcements: -

He has scrapped the single flat rate system on stamp duty for residential property and moved to a simple progressive system. From midnight tonight each rate will only apply to the part of the property price that falls within that band. The new bands will be:

  • no tax on first £125k
  • 2% on portion up to £250k
  • 5% up to £925K
  • 10% up to 1.5m
  • 12% on everything over that

The Chancellor says the changes will benefit 98% of homebuyers. However anybody about to purchase a high value property in excess of £925,000 will be worse off under the new scheme so may wish to look at the Law Firm Limited stamp duty mitigation scheme.

There are transitional rules that you can apply if for example you exchanged contracts before the 4th December and complete after that date. In this case you can chose under which set of rules you are taxed. Moreover making a transaction a day early or a day late to fall under one set of rules or the other will not be considered by HMRC to be tax avoidance.

Secondly Non-domiciled individuals also suffer a change in that while the £30,000 annual charge for being non-domiciled in the UK will be unchanged, but those here for 12 of the last 14 years will pay £60,000 a year, which will raise further to £90,000 if your are here for more than 15 of the last 17 years.

In addition clients who are using companies to purchase properties: From 5th April 2015 buyers of typically high-end properties who choose to own them through a company - a process known as "enveloped" transactions - face a further steep increase in tax, as the rate will be increased by the rate of inflation plus a further 50% of the rate of inflation.

There are two examples of calculations by old and new rules:

1. The SDLT due on the purchase of a residential property for £750,000 is calculated as follows:

a. Under the new rules the SDLT is calculated as follows:

  • 0% on the first £125,000 = £0
  • 2% on the next £125,000 = £2,500
  • 5% on the final £500,000 = £25,000

Total SDLT due = £27,500

b. Under the old rules SDLT is calculated as follows: 

  • 4% of £750,000 = £30,000

Total SDLT payable = £30,000

2. The SDLT due on the purchase of residential property for £2,000,001 is calculated as follows:

a. Under the new rules the SDLT is calculated as follows:

  • 0% on the first £125,000 = £0
  • 2% on the next £125,000 = £2,500
  • 5% on the next £675,000 = £33,750
  • 10% on the next £575,000 = £57,500
  • 12% on the final £500,000 = £60,000

Total SDLT due = £153,750

b. Under the old rules SDLT is calculated as follows: 

  • 7% of £2,000,001 = £140,000

Total SDLT payable = £140,000

Posted in English on Dec 02, 2014.