If you’re planning multiple purchases of residential property, wait for the royal assent to the Finance Act 2011, says Carl Bayley in Business Tax Saver. A change to stamp duty land tax could cut the rate on large purchases from 5% to 1%.
Under the new relief, the rate of stamp duty land tax will be based on the average consideration paid for each ‘dwelling’ with an overall minimum rate of 1%. “The rate is not automatic, but can be claimed by the purchaser.”
Take the example of Pippa, who wants to buy a new house for £550,000. If she buys now, stamp duty land tax will be payable at 4% and will amount to £22,000. If, however, she waits for the day of royal assent and arranges to buy two £70,000 flats from the same developer at the same time, the total cost rises to £690,000, but the average consideration is now just £230,000, meaning that Pippa can claim a reduction in her Stamp Duty Land Tax charge to just £6,900 (1%). “That’s equivalent to a discount of almost 11% on the flats.”