Second home owners in Belgravia and other parts of prime central London have been dealt a tax blow by Chancellor George Osborne.
In his 2016 Budget speech, Osborne announced that residential property was excluded from a tax cut that will see investors in other types of asset benefit from the higher rate of Capital Gains Tax being reduced from 28% to 20%, while the basic rate will fall from 18% to 10%.
The Treasury has also announced it will extend its stamp duty surcharge on purchases of additional property to include those who buy more than 15 properties.
From 1 April, an extra 3% levy will now be applied to standard stamp duty rates on all purchases of property that is not intended to be the buyer’s main home – even institutional investors backing big developments.
The Chancellor has also announced new stamp duty rates for commercial property.
Previously, stamp duty rates for commercial property applied to the whole transaction value, with fees of 3% being charged for business premises sold for over £500,000.
But from now on the rates will apply to the value of the property over each tax band.
The new rates and tax bands will be 0% for the portion of the transaction value up to £150,000, 2% between £150,001 and £250,000 and 5% above £250,000.
Stamp duty rates for leasehold rent transactions will also change, with a new 2% rate on leases with a net present value over £5m.
New savings scheme for homebuyers
The Chancellor used his latest Budget speech to turn the existing Help to Buy ISA into a new Lifetime ISA for savers aged under 40. This will continue to pay a 25% bonus to account holders saving towards their first home, but will also pay the government top-up if the saver holds on to the ISA until retirement.
However, the savings and bonus can only be used towards a deposit on a first home worth up to £450,000. This will exclude almost every home in Belgravia.
Other measures affecting the property market
The 2016 Budget contained a number of other announcements affecting the property market in as a whole.
- Homeowners who rent out either their parking spaces were handed a £1000 tax break, which will come into force in April next year.
- Others who let their flats and houses as holiday homes using sites such as Airbnb will also be offered the perk as an incentive to declare their earnings.
- The government has unveiled its Starter Homes Land Fund prospectus and is inviting local authorities to access £1.2bn of funding to “remediate brownfield land to be used for housing”. The Chancellor says this aims to deliver at least 30,000 starter homes, although it is very unlikely to affect the prime central London property market.
For more information on the 2016 Budget, click on the link below