Wealthy Homebuyers Boost Britain's Tax Coffers

Source: trulia.com

Britain's taxman has raised almost 50 percent more cash than it hoped for from tax increases on property transactions over the past year as London luxury residential prices continue to climb, property data showed.

Britain's cash-strapped government said last March it hoped to raise 150 million pounds ($228 million) in the year to April from increasing stamp duty - paid by the buyer - on properties worth more than 2 million pounds ($3 million), most of which are in London.

Property consultancy Knight Frank said though the tax hike had reduced annual sales of London luxury homes worth over 2 million pounds by 15 percent, the increased levy made up for the shortfall.

HMRC will have collected some 223 million pounds in extra tax revenue since the 40 percent rise was implemented, 73 million pounds more than forecast, said Liam Bailey, Knight Frank's Head of Residential Research.

Sales of London luxury homes worth over 2 million pounds plummeted as much as 35 percent in the six months after Britain announced its 2012 budget, but stabilised when the government said it would not introduce more property taxes in December, Knight Frank said.

Continued falls in the value of the British pound and political as well as economic uncertainty in the Middle East and Europe have kept London's allure as a safe haven to park wealth alive, supporting buyer appetite and prices, it said.

The average price of so-called prime central London property rose 0.9 percent in February, the highest rate in 10 months, boosted by price increases for homes worth between 1-2.5 million pounds. Prices have grown every month since Nov. 2010 and are now 55 percent above the March 2009 market low.

The property consultancy said that it however expected the tax hikes to reduce sales of homes worth over 2 million pounds in the long term by about 10 percent.