Steep Increase in the Annual Tax on Enveloped Dwellings

There has been a steep increase in the annual tax on enveloped dwellings – by 50% above inflation.

This tax was introduced in April 2013, primarily to deal with the avoidance of stamp duty land tax. Initially it applied to residential properties valued at more than £2m owned by a non-natural person, typically a company. There are various exemptions. It was anticipated that increases in the tax would be linked to inflation.

However, from April 2015, the tax applies to residential properties valued at £1m or more, with a minimum annual charge of £7,000. For properties valued between £2m and £5m the charge has increased from £15,000 (13/14) to £15,400 (14/15) and now to £23,350 (15/16). Of course, if a property has increased in value to above £5m then it moves into the next charging bracket.

This annual tax is in addition to increased rates of stamp duty land tax for purchases by non-natural persons of residential property valued at £500,000 or more.

Nick Palmer is a solicitor at Barker Gotelee, Solicitors in Ipswich.

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