Wednesday, 4 July 2012 2:50 PM
One of the most significant announcements made by the Chancellor George Osborne when revealing the Budget back in March was the introduction of a new seven per cent rate of stamp duty.
The new rate was introduced on properties costing £2 million or more and designed to ensure that the wealthy pay an appropriate amount of tax on buying a home.
This, along with the abolition of the stamp duty holiday for first-time buyers, was the biggest revelation made by Mr Osborne.
It has been more than three months since the new rate was introduced, so what impact has it had on the prime residential property market?
The answer, it seems, is that the impact has been largely negative.
Figures released by the Land Registry revealed that sales of £2 million homes have plummeted by 40 per cent since the rate was introduced.
The data - which relates to sales made in March, showed that just 124 properties costing £2 million or more were sold during the month, compared to 205 the previous year.
When the Chancellor announced the decision to raise stamp duty for properties priced above £2 million, many estate agents and property industry figures warned the move would be detrimental, claiming that the government was cutting off its nose to spite its face.
Despite the criticism, Mr Osborne said it was only fair that those who can afford it should contribute more.
So, what does this mean if you intend to purchase a home worth more than £2 million?
It means that the minimum you will have to pay in stamp duty charges is £100,000, which is a sizeable outlay for all except the fantastically wealthy.
Many buyers are understandably reluctant to pay such a significant amount in tax and therefore explore ways in which they can mitigate their stamp duty liabilities.
Stamp duty mitigation is something the government is keen to crack down on, however, the truth is that mitigation is not evasion, so it is very difficult for them to do.
Mitigation involves legitimate tax planning designed to reduce your tax liabilities, while evasion involves employing illegal means to reduce or avoid paying tax altogether.
Given the sums involved at the high end of the property market, significant amounts of money can be saved, so it is something you may wish to explore.
Stamp duty mitigation companies are staffed by tax experts whose job it is to put together effective mitigation strategies to save you money.
It is imperative that the company you choose has a strong track record of success and has its schemes reviewed by top tax QCs.
In addition, the schemes they put forward should be able to make you worthwhile savings. The very best schemes should be able to mitigate the full amount of stamp duty.
The provider should also be able to demonstrate a 100 per cent record of success with regards to any inquiries launched by HMRC.
It remains to be seen what impact the seven per cent rate will have over the long term, however, the figures from the Land Registry suggest the warnings from property industry experts held some truth.
If you intend to buy a home worth more than £2 million, stamp duty mitigation is something that may be worth your while exploring.