UK luxury property demand hit by tax policy: Winkworth, ET RealEstate

LONDON: British property group Winkworth said on Wednesday that demand for luxury properties had fallen due to tax policies targeting the wealthy and the new Labour government’s proposal to tax private schools.

Britain’s tight national finances have for some time meant there was little scope for investing government money to improve ailing public services. This has forced successive governments to focus on whether they can raise more taxes on those who have chosen the UK, and often its high-yield property market, to store their wealth.

With the Labour government promising to close tax loopholes often exploited by the super-rich, private banks and advisers have said some could leave the country altogether.

Winkworth said in its first-half 2024 trading update that overall sales were up 19% compared with the first half of 2023, but there was some impact at the higher end of the market.

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“The combination of the Conservative Party’s decision to abolish non-domicile status, Labour’s stated intention to add VAT to private school fees and higher funding costs has had a negative impact on the sector,” the statement read.

Labour, whose victory in last week’s election was widely expected, is set to scrap the exemption for private schools, which currently means they do not have to charge 20% value added tax (VAT) on the fees they charge.

Such schools are often preferred by wealthy individuals, but they can now become more expensive.

In March, the then Conservative government announced it would phase out the “non-domicile” tax status enjoyed by at least 80,000 people living in the UK who pay little or no tax in the UK on money earned abroad.

Labour went further, promising to end the use of offshore trusts, which can be used to avoid inheritance tax.

Figures released by the government on Tuesday showed that non-domiciled US residents will have to pay £8.9 billion in income tax, payroll tax and capital gains tax in the 2022/23 tax year.