Tories plan 3% property surcharge for foreigners

Additional stamp duty aimed at cooling prices and helping locals own or upgrade homes

LONDON • British Prime Minister Boris Johnson's Conservative Party plans to hit foreign buyers of homes in England with a new tax intended to cool prices and help locals get a foot on the housing ladder.

The 3 per cent surcharge, which will be charged on top of the existing tax known as stamp duty, could apply to as many as 70,000 purchases and generate as much as US$154 million (S$200 million) a year, according to an e-mailed party statement.

The Tories had previously proposed a 1 per cent surcharge.

"Evidence shows that by adding significant amounts of demand to limited housing supply, purchases by non-residents inflate house prices," Chief Secretary to the Treasury Rishi Sunak said in the statement. "That is why we are introducing a higher rate of stamp duty for non-UK residents that will help to address this issue."

This is the latest in a series of tax increases on high-end homes introduced by Conservative chancellors over the past five years that have weighed on the markets.

The most expensive homes already command a 12 per cent tax rate, rising to 15 per cent when the property is not the buyer's only home. At the same time, the government has repeatedly slashed the tax burden on the lowest-value homes.

Home prices in London's most expensive districts have declined by 20.4 per cent since their peak in 2014, before the first stamp duty hike was announced, according to broker Savills. Brexit has also brought values down 13.6 per cent since the referendum vote.

Mr Trevor Abrahmsohn, managing director of luxury real estate firm Glentree, said: "The system is creaking under the weight of existing taxes, and foreign buyers have slowed from a torrent to a trickle, so it's a mystery as to what the Chancellor is so vexed about for him to need this additional tax."

Housing is a key issue as parties vie for support ahead of the Dec 12 general election. Politicians of all stripes are vowing to step up building to ease a housing shortage that has pushed up prices and made it harder for young people to buy their first homes.

The Conservatives said proceeds from the new tax would be used to help the homeless.

The Liberal Democrats last Thursday pledged to build 300,000 new homes per year, including 100,000 for social housing, if they win the election.

On the same day, Labour published its manifesto, pledging to build at least an additional 150,000 council and social homes per year.

The party, which promised to target multinational firms it accuses of dodging taxes and cheating workers, held a rally yesterday outside an Amazon depot.

In its manifesto, it vowed to spend almost £83 billion (S$145 billion) on a programme of widespread nationalisation and free public services with the revenue coming from taxes on high earners and corporations. It said its "Fair Tax Programme" would ensure the City of London financial district, big businesses and those who dodged tax paid their share.

In remarks published before his visit, Labour leader Jeremy Corbyn referred to a "tax and wage cheat" culture among multinational corporations, saying: "Of course we want jobs in this country, of course we want people working in this country. What is a problem is if they decide to domicile their company somewhere else in order to pay tax at somebody else's tax rate, and that ends up underfunding our public services."

Amazon rebutted these comments, saying: "The government wrote the tax laws and they are designed to encourage investment, and we are investing heavily in creating jobs and infrastructure across the UK - more than £18 billion since 2010."

Labour is lagging Conservative by about 10 points or more in the polls but it hopes that targeting "vested interests" will win over voters.

"Jeremy Corbyn is lashing out at businesses because he is desperate to distract from the fact that he has no credible plan to get Brexit done," Conservative Party chairman James Cleverly said.


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A version of this article appeared in the print edition of The Sunday Times on November 24, 2019, with the headline Tories plan 3% property surcharge for foreigners. Subscribe