Residential property in the United Kingdom
A residence in London or one of the major cities in the UK is an attractive proposition. The choice of owning the property as an individual has, however, become less attractive because of increases in transfer tax otherwise known as Stamp Duty Land Tax (SDLT) in the UK. This has led some investors to use a corporate vehicle such as a company to acquire and hold residential property. This though gives rise to an additional tax. Below we examine the situation.
Stamp Duty Land Tax (SDLT)
For residential properties this is as follows:
| Purchase Price | Rate | Rate for second home | It should be noted the authorities will count a home anywhere in the World as a first home. Accordingly it can be seen why the rates for corporates begin to look attractive because by using one company for each residence then the rate for a second home will not be triggered. The disadvantage with using a company is that the Annual Tax on Enveloped Dwellings (ATED) will apply – see below. |
| £0-£125,000 | 0% | 3% above £40,000 | |
| £125,001-£250,000 | 3% | 5% | |
| £250,001-£925,000 | 5% | 8% | |
| £925,001-£1,500,000 | 10% | 13% | |
| Over £1,500,000 | 12% | 15% |
VAT
VAT is not applicable for the purchase of residential property unless it is a business such as multi-let building.
ATED and Income tax
| Purchase Price | Annual Amount due from 1 April 2016 | Annual amount due from 1 April 2017 |
| £500,001 – £1,000,000 | £3,500 | £3,500 |
| £1,000,001 – £2,000,000 | £7,000 | £7,050 |
| £2,000,001 – £5,000,000 | £23,350 | £23,550 |
| £5,000,001 – £10,000,000 | £54,450 | £54,950 |
| £10,000,001 – £20,000,000 | £109,050 | £110,100 |
| Over £20,000,000 | £218,200 | £220,350 |
Capital Gains Tax
Generally, 28% on any gain in value on the property will be due though some reliefs are available which can reduce this amount.