Chancellor George Osborne has cut commercial stamp duty in the 2016 Budget while plans to increase duty on buy to let properties and second homes is set to increase.
Recent changes to the stamp duty on commercial property mean that it will have a zero rate band on purchases up to £150,000; a two per cent rate on the next £1000,000; and a five percent rate above the £250,00 marker.
There will also be a new two per cent rate for high value leases with a value over £5 million.
Over 90 percent will see their tax bills either unchanged or cut, but not all firms will see a reduction with approximately nine per cent paying more.
Osborne claims that these changes will raise £500 million a year.
Osborne said:
“If you buy a pub in the Midlands worth, say, £270,000, you would pay over £8,000 in stamp duty. From tomorrow, you will pay just £3,000. It’s a big tax cut for small firms. All in a budget that backs small business”
However, this welcome news for small firms has been criticised by some property groups. Chief executive of the British Property Federation (BPF), Melanie Leech, said:
“Commercial property investment can often act as the catalyst for regional growth and as the economy has recovered investment has been spreading out from London to the UK’s regions, but will now undoubtedly slow.
The real set back in today’s announcement is that development in places like the Northern Powerhouse and Midlands’ Engine will not be held back as a result if this out-of-the-blue raid on commercial property transactions.”
With regards to residential property, there will be no new changes in stamp duty, however, the existing plans to raise stamp duty on buy to let and second homes has been criticised by some businesses. Osborne said:
"Just over a year ago, I reformed residential stamp duty. We moved from a distortive slab system to a much simpler slice system. And as a result, 98 per cent of homebuyers are paying the same or less, and revenues from the expensive properties have risen. The IMF welcomed the changes and suggest we do the same to commercial property."
The Chancellor’s decision to introduce a further 3 per cent increase in stamp duty on buy-to-let properties and second homes been described as the ‘final nail in the coffin for small landlords’.
And Zoopla’s Lawrence Hall believes that ‘is the latest in a series of short-sighted policies aimed at the property market”.
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