Latest news with #stampDuty
Telegraph
4 days ago
- Business
- Telegraph
Britain should ditch ‘distorting' stamp duty, says Reagan's economic tsar
Britain should ditch 'distorting' stamp duty charges that 'lock people in their homes', Arthur Laffer has urged. The economist behind the Laffer curve said property transaction taxes are such a big problem in the national tax system that the UK would be better off with an American-style annual property wealth tax. Mr Laffer, who has served as adviser to both former president Ronald Reagan and president Donald Trump, told The Telegraph that the UK would be better off if homeowners paid annual property taxes as they do in the US instead of stamp duty. He said: 'The [annual] property taxes in Britain are low, but the transaction tax is very high. The US is the reverse. We have property taxes everywhere, which is a wealth tax, and we don't have transaction taxes on houses. 'All property taxes do in Britain is lock people into their homes that they can't get out. It just distorts the whole tax system in Britain, it's just awful. 'It is one of the very biggest problems in Britain's tax system.' Mr Laffer is most famous for conceiving the Laffer Curve, an illustration of the concept that increasing tax rates can eventually lead to lower revenue because the higher taxes trigger so much behavioural change. Stamp duty is widely hated by economists and consumers alike because it makes it increasingly difficult to move home and makes the housing market inefficient – which in turn takes a toll on productivity. In America, by contrast, homeowners do not pay large taxes when they purchase their homes but instead pay an annual tax based on a percentage of their property's value. Mr Laffer said: 'Income tax is a problem in Britain, but these transaction taxes are big stuff too.' Stamp duty is taxed in bands that are not adjusted to account for house price growth, meaning homeowners get dragged into higher tax brackets as house prices rise. Since the tax bands were last adjusted in 2014, the average London house price has climbed by 30pc. Over the same time period, the stamp duty bill on the average home in the capital has surged by 54pc. The Office for Budget Responsibility (OBR) forecast in March that the Treasury's tax take from property transactions will nearly double from £15bn in 2024-25 to £26.5bn in 2029-30. Trump's tax cuts will 'save us from a disaster' Mr Laffer was an adviser to Donald Trump's 2016 campaign and says he has met with the US president several times since he took office earlier this year. He said he has told the Mr Trump that he should scrap US corporation tax on profits and replace it with a value added tax on sales. Although Mr Laffer is i n favour of Mr Trump's tax bill, he said the president should go further with measures to boost the economy. The biggest measure in the bill will be an extension to the tax cuts that Mr Trump introduced in 2017 and are due to expire this year. Mr Laffer said: 'I know they talk about it as being a tax cut. It's not. It's just making Trump's tax cuts permanent. 'If it were not passed, there would be a huge increase in taxes across the board, which would be very detrimental. The bill going through the Senate right now does not create something wonderful but it saves us from a disaster.' Mr Laffer said that America should establish a free trade agreement with the UK, and that Ireland should leave the EU to become part of the trading bloc too. 'You're gonna hate me for this, but I think it should be with Ireland too. I think they should get out of the EU and should become part of the sort of the US/ UK/Ireland group. I think that would be a terrific free trade group.'
Daily Mail
5 days ago
- Business
- Daily Mail
Can I gift my £330,000 second home to my adult kids without paying tax?
I live in Australia (and am a tax resident here) and I own a leasehold flat in Suffolk that I use when visiting the UK. I no longer wish to own the property due to the doubling of the council tax on unoccupied properties. Also, the water is muddied with regard to possible liability for UK inheritance tax. There is no inheritance tax here in Australia. I would like to gift it to my two adult children since I don't need the funds here and they will eventually inherit the property anyway. If I transfer title to them, do they have to pay stamp duty, and if so, at what rate? It is on sale at present for £330,000 Due to the government's war on landlords and buy to let (neither of which applies to me since it is not let out), it will probably not sell at that price. If stamp duty is levied on the gift, would it be possible to agree a notional sale price of £250,000 in order to fall into the lowest tax bracket, or can it even be exempt from stamp duty since there will be no money changing hands? They will then become second home owners, so does the transaction incur additional stamp duty? P.A, via email SCROLL DOWN TO ASK YOUR FINANCIAL PLANNING QUESTION Harvey Dorset, of This is Money, replies: For many Britons living abroad, its nice to continue to have a base to come back to when you visit. This would be especially the case for you, as your trips from Australia are likely to be for longer periods given the distance between the two countries. Unfortunately, you tax changes that came into effect last month in Suffolk mean that you are now required to pay twice the standard council tax rate on your property, as it is only 'occupied periodically.' East Suffolk Council states: 'At a Full Council meeting held in February 2024 it was approved that from 1 April 2025 a 100 per cent Second Home Premium charge will be applied to properties that are furnished and do not have anyone living in them as their main home. This means that 200 per cent Council Tax is payable.' Understandably, you have decided it is not worth you keeping the property under the current ownership circumstances. Instead, you want to give the flat to your children, which would pass on some wealth and help with potential inheritance tax liabilities. As you say, there is no inheritance tax in Australia but there is in the UK, meaning your situation is harder to work out. Meanwhile, as discussed below, there are other taxes that you may need to watch out for. This is Money spoke to two financial advisers to find out what you need to do in order to pass your flat to your children while keeping tax to a minimum. David Denton, head of technical at Quilter Cheviot, replies: First, from an inheritance tax point of view, your instincts are right to consider future exposure. While Australia abolished inheritance tax in the late 1970s, UK IHT still applies to most UK-based assets – including property – regardless of the tax residency or domicile of the owner. So, although you're an Australian tax resident, your UK flat remains within the scope of UK IHT. That said, with the nil-rate band currently set at £325,000 and your flat valued at around £330,000, the potential liability could be relatively minor, although the nil rate band is frozen until at least 5 April 2030. Now to the more immediate question of gifting the property to your children. Provided there is no outstanding mortgage on the flat, a transfer of ownership as a genuine gift would not trigger Stamp Duty Land Tax (SDLT) on the part of your children. SDLT is only payable if there is 'consideration' – for example, if the recipient assumes liability for a mortgage, or pays for the property. However, even if the transfer is exempt from SDLT because there is no consideration, your children may still face the 3 per cent additional homes surcharge in the future. This wouldn't apply at the point of receiving the gifted flat, but if they later went on to buy another UK property without selling the Suffolk flat, the new home would count as an 'additional property' and attract the higher SDLT rate. Lastly, you also need to consider capital gains tax (CGT). As a non-resident, you remain liable for UK CGT on the disposal of UK property, even when gifting it. The gain would be calculated as the difference between the property's market value at the point of transfer and its value when you acquired it. Certain costs associated with the transaction may be deducted, and it's likely that the annual exempt amount of £3,000 would be available, whilst depending on the level of gain, the tax rate could be up to 24 per cent. Where people often come unstuck is trying to manipulate the value of the property for tax purposes. HMRC normally expects that any transfer – whether by sale or gift – is assessed based on open market value. That means a professional valuation may be required. Artificially lowering the price could lead to tax complications and potentially penalties. In short, your children won't pay SDLT upon receiving a gift without a mortgage, but there are still IHT and CGT considerations. It's worth seeking tailored advice and a professional valuation to ensure all angles are covered properly. Check your inheritance tax position carefully Oliver Loughead, wealth manager at RBC Brewin Dolphin, replies: Transferring ownership of UK property to children is a significant decision that carries various legal, financial, and tax implications, particularly for individuals who are not resident in the United Kingdom. Regarding inheritance tax (IHT) treatment of the property, for a non-UK resident, IHT will normally be due on UK assets only (subject to new long-term UK residency rules) that exceed the available nil rate band (NRB), which is currently £325,000 per person. If you have a spouse or civil partner, it might be possible to make use of both of your available NRBs, so £650,000. Under UK law, a gift of property is typically treated as a potentially exempt transfer (PET). This means that if the donor survives for seven years following the date of the gift, the value of the gift may fall outside the scope of IHT. However, if the donor dies within that period, the value of the gift may still be brought into account for IHT purposes. In such cases, taper relief may apply, potentially reducing the amount of tax due depending on the time elapsed between the gift and the donor's death. If you have previously lived in the UK, you should check if you qualify as a long-term UK resident, as your worldwide assets may fall into scope for UK IHT. You are deemed a long-term UK tax resident if you have been resident for either the previous 10 consecutive years or a total of 10 years or more within the previous 20 years. Help with financial advice and planning Financial planning can help you grow your wealth, sort your pension, or make sure your finances are as tax efficient as possible. A key driver for many people is investing for or in retirement and inheritance tax planning. If you are looking for help sorting your finances and want to work out whether you need advice, planning, or coaching, the following links can help you understand more: >Do you need financial planning or financial advice - and is it worth it? > Financial advice: What to ask and how much it might cost > Are you retirement ready? Take our quiz and get financial planning help > Inheritance tax planning - what you need to know to protect your wealth Regarding concerns around stamp duty land tax, SDLT generally does not apply to gifts of property unless the recipient assumes a mortgage on the property. In cases where the transfer involves taking over an existing mortgage, SDLT may be charged based on the value of the outstanding loan. Therefore, the structure of the gift - especially whether the property is encumbered - must be carefully evaluated. Capital gains tax (CGT) should also be considered. Since April 2015, non-residents have been liable for CGT on disposals of UK residential property. A gift of property is treated as if the donor has disposed of it at market value, even if no money changes hands. This means that any increase in the property's value from its acquisition (or from April 2015 if it was owned before that date) to the date of the gift may be subject to CGT. Non-resident individuals must report and pay any CGT due within 60 days of completing the gift. The legal process for transferring UK property to children is complex. A UK-based solicitor should be instructed to handle the conveyancing and ensure all necessary documentation is completed, including a deed of gift or transfer deed. An often-overlooked aspect of gifting property is the potential loss of control. Once the property is legally transferred, the donor no longer holds rights over it unless specific conditions are attached, such as transferring it through a trust. Establishing a trust can be a useful mechanism to maintain some level of influence over the property while still achieving estate planning objectives. However, trusts introduce their own tax implications and legal complexity, so professional advice is essential before proceeding. In conclusion, while gifting UK property to children can be a valuable tool for estate planning and wealth distribution, non-UK residents must carefully assess the legal and tax consequences. Thorough planning, supported by expert advice from UK solicitors and cross-border tax professionals, is essential to ensure that such a transfer achieves the desired outcome without triggering unintended liabilities.
Times
6 days ago
- Business
- Times
UK house sales fall after April's stamp duty changes
Fewer house sales completed in April than in any month since the first lockdown after the increase in stamp duty costs. There were 55,970 residential transactions in the UK, according to the latest data from HM Revenue & Customs. That was 66 per cent fewer than in March, which was an especially busy month for estate agents, solicitors and removals companies. HMRC said it was the biggest month-on-month fall it had recorded. April was the slowest month for completions since May 2020 during the first lockdown, when the housing market was still effectively shut. By contrast, 165,340 sales went through in March, which was an 81 per cent month-on-month increase and the most since June 2021, just before the last stamp duty holiday was due to end.
Yahoo
7 days ago
- Business
- Yahoo
House sales ‘plunge' in April as stamp duty deadline ends buyer stampede
House sales dropped sharply last month as the stamp duty deadline put the brakes on buyer activity following a March rush, new figures show. There were 64,680 house sales in April – 64% lower than the 177,440 reported in March, according to estimates from HMRC. It was also 28% lower than the 89,860 sales reported in April 2024. HMRC said the latest figures have been affected by changes to stamp duty rates – a tax on property which applies in England and Northern Ireland. From April 1, first-time buyers started paying stamp duty on properties costing more than £300,000. They were previously exempt from paying the tax on properties up to £425,000. Buyers wanting to take advantage of the tax relief resulted in a stampede in the months prior to the deadline. Lenders including Lloyds and Nationwide reported their busiest ever month of lending in March with house purchases rocketing ahead of the deadline. Earlier this month, figures from the Office for National Statistics (ONS) showed the average UK house price increased by 6.4% annually in March as the flurry of activity provided some extra impetus for the housing market. Jason Tebb, president of property platform OnTheMarket, said: 'April saw a plunge in transactions following March's stampede to get deals across the line and take advantage of the stamp duty holiday. 'However, despite the removal of the stamp duty concession, the market remains remarkably resilient. 'This month's interest rate reduction, the fourth since the Bank of England started cutting rates last August, has given buyer and seller confidence a welcome boost.' Richard Donnell, executive director at Zoopla, said the latest data 'reflects the rush to beat the stamp duty holiday, which is still impacting the numbers from sales agreed three to five months ago'. He added: 'Our latest data shows a lull in new sales over Easter but a significant pick-up in sales agreed in recent weeks, reaching their fastest pace in four years. 'This resurgence is supported by less stringent affordability testing for mortgages, a larger pool of active buyers and an increase in homes available for sale.' Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
The Independent
7 days ago
- Business
- The Independent
House sales ‘plunge' in April as stamp duty deadline ends buyer stampede
House sales dropped sharply last month as the stamp duty deadline put the brakes on buyer activity following a March rush, new figures show. There were 64,680 house sales in April – 64% lower than the 177,440 reported in March, according to estimates from HMRC. It was also 28% lower than the 89,860 sales reported in April 2024. HMRC said the latest figures have been affected by changes to stamp duty rates – a tax on property which applies in England and Northern Ireland. From April 1, first-time buyers started paying stamp duty on properties costing more than £300,000. They were previously exempt from paying the tax on properties up to £425,000. Buyers wanting to take advantage of the tax relief resulted in a stampede in the months prior to the deadline. Lenders including Lloyds and Nationwide reported their busiest ever month of lending in March with house purchases rocketing ahead of the deadline. Earlier this month, figures from the Office for National Statistics (ONS) showed the average UK house price increased by 6.4% annually in March as the flurry of activity provided some extra impetus for the housing market. Jason Tebb, president of property platform OnTheMarket, said: 'April saw a plunge in transactions following March's stampede to get deals across the line and take advantage of the stamp duty holiday. 'However, despite the removal of the stamp duty concession, the market remains remarkably resilient. 'This month's interest rate reduction, the fourth since the Bank of England started cutting rates last August, has given buyer and seller confidence a welcome boost.' Richard Donnell, executive director at Zoopla, said the latest data 'reflects the rush to beat the stamp duty holiday, which is still impacting the numbers from sales agreed three to five months ago'. He added: 'Our latest data shows a lull in new sales over Easter but a significant pick-up in sales agreed in recent weeks, reaching their fastest pace in four years. 'This resurgence is supported by less stringent affordability testing for mortgages, a larger pool of active buyers and an increase in homes available for sale.'
