A 'mansion tax' did appear in the Budget, but not the one most feared. The dreaded annual charge will only apply to high-value homes held within a tax-avoiding corporate 'envelope'. The remaining market for £2m-plus homes will instead be hit by a new stamp duty land tax (SDLT) rate of 7 per cent, which the Treasury hopes will boost tax revenues by £150m next year.
Chancellor George Osborne reserved some of his strongest language for "morally repugnant" tax evasion and "aggressive" tax avoidance. In addition to the mansion tax, he launched an eye-watering 15 per cent SDLT rate for any houses worth more than £2m purchased within corporate envelopes (though as a deterrent, it isn't expected to raise any money). Properties held within overseas envelopes will also be subject to capital gains tax from April 2013. Plugging these loopholes is expected to raise a piffling £65m a year.
Lucian Cook at Savills thought the new SDLT rate would be "an irritation rather than a deal breaker" in London, but might hit the much weaker market for prime country homes. The British Property Federation, the chief lobbying group for the property industry, meanwhile worried that the extension of capital-gains tax liability to residential property held within offshore companies would limit institutional investment in housing - which the government is desperate to promote. The National Landlords Association also worried that buy-to-let companies could be swept up in Mr Osborne's clampdown on tax evasion.
