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Budget puts spotlight on rich

High-net worth individuals have taken centre stage in this year’s budget as Chancellor George Osborne introduced a series of measures targeting the wealthy.

21 March 2012

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Most notable changes are the introduction of a seven per cent rate of stamp duty on property sales over £2m, and the government’s plans to crack down on stamp duty avoidance among the rich by preventing individuals from placing expensive property into offshore companies. Individuals buying properties over £2m through a company will now face stamp duty of 15 per cent.

Liz Peace, chief executive of the British Property Federation, warns that the moves could have a detrimental effect on investment. “The capital gains tax change alongside the stamp duty land tax proposals needs to be watched carefully, because it could operate to reduce the financial attractiveness of large-scale investment in residential property.

“Many funds or corporate investors will use offshore structures to hold their assets, and given the reliance on capital growth to generate returns acceptable to investors, losing a big bite to the taxman could cause real problems. Hopefully the government will recognise during the consultation process that this measure could, if wrongly targeted, deter exactly the sort of major investment that UK housing needs.”

However, higher earners will benefit from the widely anticipated cut in the top rate of income tax from 50p to 45p in April 2013. Richard Palmer, head of tax at Ashurst, says: “The 50 per cent tax rate hasn’t generated the revenues that the government had expected and has probably hampered growth in the private sector so its reduction will be welcomed.”

More good news for high-earners was that rumours of changes to tax relief on pensions proved unfounded. Says Louis Baker, head of professional practices group at accountants Crowe Clark Whitehill: “High earners previously worried about the rumours of changes to tax relief on pensions will be relieved that there are none. Indeed, they now have until 5 April 2013 to maximise their use of the deemed annual allowance for 2009/10 through to 2012/13 at 50 per cent rate of tax relief.”

Keep an eye on PCA for more analysis of the budget

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Tax & Wealth structuring