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- UK buyers pay no stamp duty on low value properties
- Homebuyers in the US pay virtually zero tax
Following the emergency cut to stamp duty, the UK now has lower tax rates than most European countries on purchases of a prime (USD1 million) property, with buyers paying just 1.93% of the property’s value in tax compared to the European average of 4.53%, our research shows.
Our study shows that since the Chancellor raised the Stamp Duty threshold in the Summer Budget, a homebuyer in the UK pays just USD19,300 in Stamp Duty on a purchase of a home worth USD1 million, compared with a European average of USD45,294 (see table below). The effective Stamp Duty rate was 3% before the emergency cuts. Globally, buyers pay an average of 4.5% on the purchase of a prime (USD1 million) property.
The cut to Stamp Duty, which will last until the end of March 2021, is aimed at stimulating the residential property market following a sharp drop in transactions during the coronavirus outbreak. Property transactions also lead to increased economic activity such as money spent on refurbishments, redecoration, white goods purchases etc.
Although the Stamp Duty cut will help ordinary people buying lower-value properties, it does leave buyers of properties worth USD 2 million and up paying more tax in the UK than in most other countries. Homebuyers of a property worth USD2 million still pay 5.78% in Stamp Duty, putting the UK ahead of Germany (5.38%) and Italy (0.63%) and an average for the US of 0.39%.
Many overseas high net worth investors have been attracted to London in recent years and are now substantial investors in the UK economy. There are fears that the UK could become less attractive to this group, through increasing taxes and this could have a disproportionately large impact on economic growth and job creation in an already-challenging period for the UK.
These new cuts do somewhat redress the balance of the 2014 Stamp Duty reforms, which raised taxes USD1 million purchases, and the addition of second home and overseas Stamp Duty surcharges in recent years. The UK charges lower taxes on a USD1 million property purchase than similar economies such as France (6.16%) and Germany (5.38%), while buyers of lower cost properties worth USD150,000 benefit from no Stamp Duty at all.
Andrew Snowdon, Head of Tax in our London office says: “The newly announced cut to Stamp Duty is an encouraging sign for the housing market and should boost property purchases and the associated economic activity.”
“Cutting taxes on property purchases in the UK will hopefully improve confidence in the market, as property price growth has slowed since the Brexit referendum and been hit hard by coronavirus.”
“However, the UK’s Stamp Duty regime is still tougher on super-prime properties. For the government to charge over USD100,000 on a $2 million home is seen as harsh by many, especially if they are then charged the second home or overseas investor surcharges on top.”
“While it’s great for working families to have zero Stamp Duty, when the housing market has shown little growth for several years the government should consider a cut to bring higher net worth investors back into the market in greater numbers. The UK benefits from their spending and investment.”
Several major developed economies now charge tax worth more than 10% on the purchase of a home worth USD150,000, including Belgium (11.66%) and Japan (11%).
Rates of tax on a purchase of a home worth USD2 million across the United States average just 0.39%, while Russia levy no tax at all on purchases of residential property, regardless of value.
Our tax professionals studied tax data for individuals purchasing a house worth USD150,000, USD1 million and USD2 million in 27 countries across its international network, including all members of the G7, as well as key emerging economies.
The average tax paid on a home purchase has risen quickly in recent years. A previous study of property taxes by UHY, in 2013, found that G7 countries charged an average of 2.29% tax on the purchase of a home worth USD150,000. This has now risen to an average of 3.57% in 2020.
All 27 countries ranked by the amount and the percentage of tax paid on a purchase of a USD150,000 property – Spain, Bangladesh, Belgium and Japan all above 10%
All 27 countries ranked by the amount and the percentage of tax paid on a purchase of a USD1 million property – UK Stamp Duty regime much tougher on USD1 million purchases
All 27 countries ranked by the amount and the percentage of tax paid on a purchase of a USD2 million property – USD2 million homebuyers in the US pay virtually zero tax
