Many wealthy foreign individuals have avoided stamp duty by setting up a company for the sole purpose of buying a high-end property. They will still be hit by a 15 per cent stamp duty rate on homes worth over £2m, as well as an annual levy starting at £15,000 for property worth between £2m and £5m.
But the Treasury said genuinely commercial investments in prime property – such as for buy-to-let purposes – will be taxed at the seven per cent stamp duty rate and be exempt from the levy.
Capital gains tax at 28 per cent will also be extended to non-resident foreign owners selling homes worth over £2m. Almost all the affected properties are in London and the south-east.
Naomi Heaton, chief executive of asset manager London Central Portfolio, said many foreign owner-occupiers will still chose to buy through a corporate structure and pay the new 15 per cent rate due to “inheritance tax savings and personal privacy.” She added: “This levy is likely to be accepted as part of the investment cost.”