Stamp Duty Changes – stamping out a “tax on aspiration”?
Stamping out a “tax on aspiration”?
Announcing a radical reform of the UK’s stamp duty system Chancellor George Osborne said that for too long rates had been “a tax on aspiration”. Up until the surprising and very welcome measure was announced on the 3rd December 2014 HM Revenue & Customs operated a “slab structure”.
If the price of a home fell into a particular band the entire cost of was taxed at the relevant rate. Thus, a house costing £180,000 attracted stamp duty of £1,800 – unlike income tax, the rate was not just applied to the sum above the £125,000 nil rate band. So, there was a big hike in the liability to duty when the threshold was crossed. For instance, a home costing £249,000 attracted a bill of £2,490, while one costing £250,001 attracted a bill of just over £7,500.
Under the new UK situation e.g. on a £180,000 house purchase there will be no tax to pay on the first £125,000, then 2% on the remaining £55,000, i.e. a total bill of £1,100, versus £1,800 before the changes. The “slab structure” has been replaced by a progressive system for all transactions under £937,000.
In Gibraltar first and second time buyers are exempt from duty up to the first £250,000 (third time buyers are exempted up to £200,000). After the exemption sum of £200,000 (for first and second time buyers) duty is payable at 2% on the first £250,000 and 5% on the next £100,000. Over £350,000 the rate is 3% on the first £350,000 and thereafter 3.5% on the balance.
Whilst exemptions in Gibraltar continue to be very more generous than those in the UK, the “slab structure” is still part of the Gibraltarian Stamp Duties regime and all eyes will be on the Government to see whether it will take follow Osborne’s example in order to further motivate the City of Gibraltar’s home ownership sector currently responsible for a veritable construction boom with all the related benefits that that brings to the economy.