Budget 2021: Tax on foreigners buying homes ‘could backfire’ in London

B

ritain’s highest ever property stamp duty rate will deter investment in London at a time when it needs to “sell” itself more than ever as a post-Brexit global city, property advisers have warned.

Chancellor Rishi Sunak confirmed on Budget Day that a two per cent surcharge will be added to the tax burden for foreigners buying a home in Britain.

For investment or second home properties worth more than £1.5 million that takes the top rate up to a record 17 per cent from April 1.

It is the first time that a property tax in Britain has singled out overseas buyers and is one of the highest marginal rates on property transactions in the world.

The extra tax rate was first mooted as long ago at the 2018 Budget in response to concerns that wealthy “buy to leave” foreigners were snapping huge swathes of the capital’s most desirable areas leading to deserted “lights out London” neighbourhoods.

Tom Moran, a partner at law firm Charles Russell Speechlys said the additional burden could make the difference between a wealthy investor buying in London or deciding on New York or Paris instead.

He said: “Unfortunately the Chancellor did not defer this change, which penalises overseas buyers with extra tax. For the first time, UK and non-UK buyers are treated differently.

Although it is not a popular view, we should be mindful of making the UK property market less attractive to foreign money, not just in terms of the primary investment in the asset class, but also the secondary spending on construction, renovation, interior design, services and “lifestyle spending”.

Chris Dietz, executive vice president at property network Leading Real Estate Companies of the World said:”The upcoming two per cent levy on international purchasers is a real issue for developers and the wider property industry.

“Overseas investment into the UK market is key, particularly with off-plan sales fuelling delivery of homes throughout the country. The Budget was a missed opportunity to scrap the tax and reignite international interest in London as a global hub, sending a positive global message as we look forward to an uncertain post-Brexit landscape.”

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