Stamp Duty Land Tax

The differential rates of 7% and 15% will continue to apply to £2million+ property. Whilst 15% will apply where property is acquired by a 'non-natural' person; the exemptions have been widened to correspond with those applying to the ARPT.

Accordingly, the 'standard rate' of 7% will apply where dwellings are either held by property development companies or let out to third parties on a commercial basis.

In the case of SDLT, the exemptions will only apply once the Finance Bill receives royal assent, which is expected in June or July of 2013. This may result in the delayed completion of some deals to ensure a lower rate of tax.

Additionally, where within three years the property is no longer used for such purposes, additional SDLT will be paid as if the original acquisition was taxable at 15%.

Capital Gains Tax

CGT will be applied at 28% on gains that accrue on or after 6 April 2013, where a 'non-natural' person disposes of an interest on a £2million+ property in those circumstances where that person is already liable to the ARPT.

Further details regarding the application of capital gains tax will only become known once draft legislation (that was excluded from the draft Finance Bill) is published. This is expected in January.

Clarification regarding the manner in which the gain accruing post 6 April 2013 is calculated and the tapering of the tax charge will be critical.

Impact on the market

The imposition of increased SDLT charges and the ancillary tax proposals announced in the 2012 Budget have undoubtedly added an element of caution to the market.

Since the initial announcements in the Budget, price growth in the prime central London market has slowed considerably. In the nine months post-Budget, prices have risen by just 1.5%, having risen by 3.7% in the first quarter of the year. That means price growth in 2012 was 5.3%, compared to 14.2% in 2011 and 6.7% in 2010.

Our own sales figures indicate that this has coincided with a 25% fall in transactions in the £2million - £5million market, where the impact of the proposed changes has been most noticeable. Other agents put the figure closer to 45%.

By contrast, sales over £5million transactions have remained much more robust. In the nine months, April to December inclusive, we estimate that there have been just over 300 sales of £5million+ property, generating aggregate sale proceeds of £3.1billion. In the same period of 2011, there were around 275 such sales worth £3.4billion.