The introduction of a new Stamp Duty system is supposed to hit the richest who can afford to pay £1 million for a property but in reality the very wealthy are still getting away with contributing far less than their due when they buy property.
The reform of Stamp Duty, which will make house buying cheaper for 98% of purchases, wasn't the only property tax change in the autumn statement; the 'annual tax on enveloped dwellings' (ATED) was also increased by 50%.
The ATED is levied on residential properties purchased through a company, which wealthy people do in order to avoid paying Stamp Duty. The disparity between the Stamp Duty and the ATED is marked – even though the former is a one off tax and the latter is annual, you'd still have to hold a property for a very long time in order for ATED levies to catch up to Stamp Duty.
If we take the example of a £5 million property purchased in the normal way, the Stamp Duty would be now be £513,750 – up from £350,000. If the same property was purchased via a company the ATED would be £23,250 – up from £15,400. Doesn't seem like a lot for a £5 million house does it?
I think the Stamp Duty reform is great. The old system was unfair and distorted the market around the thresholds. I can also see why chancellor George Osborne believes it is a better solution that the mansion tax because it is more workable and hits those that can afford to pay higher taxes.
What I can't work out is why the government doesn't just put an end to the Stamp Duty exemption for residential properties held in companies? With Stamp Duty hiked up for the richest, surely those buying £5 million mansions are more likely to buy a property through a company rather than through the proper channels and avoid the increase Stamp Duty altogether.
If you're buying a £5 million property the chances are you can avoid to hire a clever tax bod to work out the cheapest way for you to purchase property.
What a shame that the government has left a gaping loophole ripe for exploitation in an otherwise great reform of the way property is taxed in this country.
Autumn Statement 2014: what it means for you
Autumn Statement 2014: missed opportunities
Autumn Statement 2014: what the papers say