Last year proposals were revealed to open Charles Dickens’ country house, Gads Hill Place, in Higham, Kent as a museum. Dickens first saw the house as a child and dreamt of living in the “wonderful Mansion” later in life. Years later he did precisely that and purchased the house for £1790 in 1856. In that house Dickens wrote one of my favourite books, Great Expectations, published in 1860. What of the expectations for mansions in 2014 and beyond? Well, it seems taxation may be on the agenda.
An update on the Mansion Tax. If introduced, this will be a tax which will target high value residential properties – current speculation is properties which are worth more than £2 million. The tax may be payable annually on a “per property” basis on the additional value over and above £2 million – so a property valued at £3 million would see a proposed annual tax of 1% on £1 million worth of value. A banding system may be introduced for higher value properties, much in the same way as applies currently for the Annual Tax on Enveloped Dwellings (“ATED”). Some concessions may be available – for example for those who are asset rich but cash poor, such as a retiree with a modest pension owning a central London property purchased many decades ago.
Turning to ATED, this annual charge is payable where UK residential property has been “enveloped” – i.e. ownership is by a company rather than an individual. This situation might have occurred where a buyer purchased the shares of the company owning the property rather than the property asset itself. This would have incurred a 0.5% stamp duty charge on the shares of the company, whereas the purchase of the property asset would have attracted the higher Stamp Duty Land Tax rate. The useful link below details the rates applicable for the current financial year and the timeframe for the reduction in the current £2 million threshold down to £500,000 by 1 April 2016. The perception is the tax will affect an increased number of properties in 2016:-http://www.hmrc.gov.uk/ated/basics.htm#2
Finally turning to Capital Gains Tax, a recent change to the CGT regime is worth mentioning and applies to non-UK residents. As from April 2015, UK CGT will be payable on the disposal of UK residential property by non-UK residents and companies, thereby bringing them into alignment with the CGT rules which affect UK residents.