There was a surprise announcement in today’s Budget in relation to “high-end” residential property. 

The government has significantly extended the scope of the SDLT 15% “penal” rate that applies to acquisitions of residential property by non-natural persons (i.e. corporate entities). The 15% rate currently applies to individual residential properties worth over £2,000,000. From midnight tonight the 15% rate will also apply to individual residential properties worth over £500,000 (where the property is acquired by a non-natural person).

This new measure takes effect in respect of transactions with an effective date on or after 20 March 2014. 

This is part of a wider package in relation to “high-end” residential property, as changes to the rules on ATED and the ATED-related capital gains tax charge will be introduced in 2015 and 2016.

Extension of the ATED to residential properties valued over £500,000 – applies for those properties held by a non-natural person. The Government has announced 2 new bands in respect of properties worth £500,000 to £1 million and £1 million to £2 million. The £1 million to £2 million band comes into effect from April 2015 (with a £7,000 charge in 2015-16), and the £500,000 to £1 million band comes into effect from April 2016 (with a £3,500 charge for 2016-17). The government has also announced a consultation on possible simplifications to ATED administration to reduce compliance burdens for genuine businesses.

Extension of ATED-related capital gains tax charge - (28%) extended to properties in the new ATED bands. The ATED related CGT charge on disposals of properties liable to ATED will apply in respect of residential properties worth over £1 million and up to £2 million with effect from 6 April 2015 and for residential properties worth over £500,000 and up to £1 million with effect from 6 April 2016.