Carter Jonas
Carter Jonas

Prime Residential Property Taxation

January 2013

 Stamp Duty Land Tax

The latest revision to the taxation of prime residential property within the UK was initially announced in the 2012 Budget. A new bracket of Stamp Duty Land Tax (SDLT) for residential property with a value of £2 million was introduced at 7% and significantly, a new taxation for the same price bracket bought by "non-natural persons" (i.e. companies, partnerships including companies and collective investment schemes) at 15% was also announced.






£125,000 - £250,000


£250,000 - £500,000


£500,000 - £1 million


£1 million - £2 million


>£2 million


>£2 million (purchased by defined non-natural persons)

The recent draft Finance Bill provided further clarity on the latest tax changes and implications. This included the various exempting properties which were not outlined in the initial consultation which although created some uncertainty within the market at the time, according to our Prime Central London statistics did not materially stall market activity at year-end.

The exempting properties detailed include:

  • Properties held for the purpose of the property development trade
  • Properties held for the purpose of letting to third parties for rent on a commercial basis
  • Properties held for the purposes of a trade of buying and selling property
  • Properties open to the public with access to the interior for at least 28 days per year as either a venue or on a commercial basis
  • Properties held to provide employee accommodation for the company’s commercial purposes
  • Properties owned by charities
  • Farmhouses occupied by working farmers
  • Certain other diplomatic, publicly owned properties or properties conditionally exempt from inheritance tax

Relief will be revoked if any person connected with the owner of the dwelling occupies it for three years following the date of purchase. The only exception being the two exemptions relating to farmhouses and houses providing public access.

 Annual residential property tax (arpt)
An additional charge, the Annual Residential Property Tax (ARPT) will be introduced from 1 April 2013 for residential properties with a value of £2 million and over and held, entirely or partially by a company or other corporate body or a collective investment vehicle (such as a unit trust or an open ended investment company). The amount of tax payble is calculated using a banding system listed below based on the property value.



£2 - £5 million


£5 million - £10 million


£10 million - £20 million


>£20 million


Owners will need to determine the value of the property, either through a professional valuer or self assessment, and submit it to the HMRC. Valuations must be based on an open-market willing buyer, willing seller basis. It must be a specific figure and not based upon a range (i.e.  £1.5 – 1.75 million).

The valuation figure will be used for the first 5 ARPT return periods beginning 1 April 2013 and will be the valuation at 1 April 2012 or when you bought or acquired it, if later. All properties within ARPT need to be revalued again in five years time i.e. April 2017.

Capital gains tax
The CGT range is to be extended to include a charge of disposals of UK residential property with a value of £2 million and over by "non-natural" persons. Within current legislation CGT is only payable by UK residents, although with effect from 6 April 2013 the tax regime will be extended and all financial gains from that date by "non-natural" persons will be eligible to the new tax extension. The list of exempting parties to ARPT listed above will apply to the new tax regime.

The CGT tax will be allied to gains of the disposal, or part disposal, of high value residential property, including the grant of an option over such property from 6 April 2013. The rate of CGT tax will be 28%, with tapering relief for gains where the property is worth just over £2 million.

These changes will clearly have an impact on owners, investors and occupiers of prime residential property throughout the UK.

Catherine Penman

Catherine Penman

Catherine is Head of Rural Research at Carter Jonas and is based in London and...

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