London, 21 March 2012. The 2012 Budget was fiscally neutral. Despite recent economic data released suggesting the economy is beginning to improve, the announcement by the credit ratings firms Moody and Fitch to place the UK on “negative watch/outlook” was at the forefront of George Osborne’s mind and he stuck rigidly to his deficit-cutting plan.
The Office of Budget Responsibility revised its UK growth forecast up from 0.7 per cent to 0.8 per cent in 2012 and 2.0 per cent in 2013. UK inflation is forecast to fall from 2.8 per cent in 2012 to 1.9 per cent in 2013.
Key points impacting the property market include:
- A new stamp duty level of 7 per cent was announced for residential properties over £2m from midnight today. Any such homes purchased through an off-shore corporate structure will be liable for 15 per cent stamp duty.
- The Government will extend the capital gains tax regime to gains on the disposal of UK residential property and shares/interests in such property by non-residents.
- Government support for £150m of tax increment financing to help councils promote development which will help to deliver 3,000 new homes.
- Osborne commented that some companies are using the VAT rules that exempt the rental of land to avoid tax that their competitors are paying which may have implications for both taxpaying funds and non-tax paying organisations such as charities and trusts.
- The abolition of the 50 per cent tax on those earning more than £150,000 per annum was announced and from April 2013 will stand at 45 per cent.
- The personal tax allowance will be raised to £9,205 in April 2013, an increase of £1,100.
- Corporation tax will be cut to 24 per cent in April 2012 and will reduce to 22 per cent by 2014.
- A new general anti-tax avoidance rule will be introduced.
Catherine Penman, head of Research comments “The introduction of the new level of stamp duty and the 15 per cent payable for a residential property purchased via a corporate structure is a bullish decision. The effect on these rises will be most prominent in London which typically accounts for circa 85 per cent of property sales over £2m within the UK”.
Richard Liddiard, head of Rural Agency comments “The stamp duty changes will have minimal effect on agricultural land market as it only applies to residential properties in excess of £2m. Activity from overseas buyers in the farmland market is predicted to continue. The quality of life issue is still predominant in their minds and at the moment they are being taking on by commercial farmers who are very active in the marketplace”.
Scott Harkness, head of Commercial “The stamp duty changes will have little effect on the commercial market but could impact marginally on mixed-use developments, especially in London. The Chancellor has incorporated a number of growth initiatives and infrastructure proposals in the Budget which should stimulate commercial activity, particularly in the regions”.