Property tax hikes 'impact' UK home sales

PHOTO: Property tax hikes 'impact' UK home sales

Recent stamp duty hikes have slightly altered the landscape for investors keen to buy residential properties in Britain.

In March this year, the stamp duty imposed by the British government on property sold for more than £2 million (S$4 million) rose from 5 per cent to 7 per cent while the duty for a company buying such a home trebled to 15 per cent.

The hike came just 12 months after an earlier rise of one percentage point for stamp duty on property worth £1 million or more.

The rate for property worth between £1 million and £2 million is now 5 per cent.

On top of this, further tax changes such as an annual levy and a capital gains tax are expected in April next year for "non-natural" ownership of homes worth £2 million or more.

This includes companies, trusts and other special purpose vehicles.

Mr Martin Rimmer, tax manager at The Fry Group, said that despite this increase, the value proposition offered by British property has not changed fundamentally as the exchange rate remains favourable for Singaporean investors.

However, there has been a little more sensitivity from sellers. More are opting to hold the price slightly under £2 million to avoid the hike in stamp duty, he added.

A Knight Frank report noted that initial signs from the London market show "some impact" from the tax changes, especially in the £2 million to £5 million bracket.

Sales volumes have fallen since the new rules were introduced in March. However, the market for super prime homes of £10 million or more has held up, it said.

Mr Philip Munro, associate at Withers Singapore with its funds, investment and business tax practice, said that he expects direct investment rather than investment through companies to be much more common with the overhaul of the tax regime.

Experts add that while the changes might put off some foreign property investors, planning and restructuring options can protect an investor from inheritance and capital gains taxes with the effective rate of tax on rents kept relatively low.