In yesterday's Autumn Statement, the UK Chancellor announced several measures that will directly affect non-UK individuals who live or own property in or are considering moving to the UK. Although in many cases the measures will mean that such individuals are liable to pay more tax in the UK than previously (whether on one-off transactions or on an ongoing basis) the UK remains an attractive place for individuals to settle with a tax regime that has many advantages over those of other European jurisdictions.
Many of the changes focus on residential property which has now been targeted for increased tax by all of the political parties in the UK.
High value residential property - increased purchase costs
The Autumn Statement introduced a significant change to the Stamp Duty Land Tax ('SDLT') system for residential property. These changes came into effect at midnight last night. As from today, SDLT will be payable at new rates on the portion of the purchase price falling within new set bands. This is a significant change to the old system, under which a single rate of purchase tax applied to the entire purchase price.
The effect of these changes is that high value properties will be subject to significantly higher total SDLT charges. In brief, a 0% rate will apply up to £125,000. From £125,001 - £250,000 a 2% rate applies, and from £250,001 - £925,000 a 5% rate applies. A 10% rate applies from £925,001 - £1.5m and a 12% rate over £1.5m.
The bands have been designed to ensure that properties purchased for £937,500 or less will not be affected. However, an individual purchasing a property for more than £937,500 will have to pay considerably more SDLT than before and the greater the purchase price, the greater the overall effect. For example, a £5m property will now carry a £513,750 SDLT charge (where previously the charge would have been £350,000) and a £10m property will now carry a £1,113,750 SDLT charge (where previously the charge would have been £700,000).
The flat 15% charge will continue to apply to properties worth over £500,000 bought by non-UK resident companies.
Extra ATED charge
In addition to the new SDLT charges, the Annual Tax on Enveloped Dwellings ('ATED') is to increase significantly. From 1 April next year the ATED charge for a residential property owned by a company or other 'enveloped' structure will be subject to ATED at £23,350 for properties worth £2 - £5m (previously this charge was £15,400), £54,450 for those worth £5 -...