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The budget 2014 and the possible implications on the London Property market

20.03.2014

For those who hold property through a company structure, the annual tax on enveloped dwellings (Ated), will be extended to properties which fall under two new bands. Properties valued between £1m to £2m will be taxed at £7,000 a year from April 2015, while those valued at £500,000 to £1m will incur Ated at £3,500 from April 2016.

Whether this will have any detrimental impact on the strength of the London property market is doubtful but yet to be seen. There have been few, if any adverse effects on transaction numbers or price levels since the increase in SDLT back in 2012 and the implementation of Ated in 2013.

Marios Gregori, Tax Partner at BDO LLP, said: “The extension of the 15% rate of Stamp Duty Land Tax (SDLT) for acquisitions of residential property by non-natural persons (ie a company’s) to properties costing more than £500,000 should do little to dampen the burgeoning property market and is a welcome step to protect the tax base (previously the threshold was £2million). The extension of the Annual Tax on Enveloped Dwellings (ATED) to the same limit will give an additional compliance burden to affected taxpayers who will need to file ATED returns and make payments on an annual basis.” 1

Another announcement that brought more cheer in general to the housing market as a whole, was that first time buyers would be handed a huge fillip by the Chancellor confirming that the much talked about Help to Buy scheme, will be extended to the end of the decade. Whilst not many first time buyers are active directly in the prime areas of central London, they form a vital part of the overall housing market and the positive effects this will have on transaction levels, market sentiment and house building will no doubt filter through.

For more reading on both these subjects, please see articles below:

1 BUDGET 2014: BDO VIEW ON REAL ESTATE & CONSTRUCTION

Budget 2014: Upmarket property ripe for raiding