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Estate agency group Knight Frank said the Labour government’s decision to impose VAT on private schools from January instead of September next year would increase alarm and hit the luxury property market.
The changes are thought to have raised fears that tough changes to capital gains tax, inheritance tax and pension tax credits could be made in the Autumn Budget on October 30.
“While the measure itself will not have a dramatic impact on the luxury property market, combined with other potential tax increases it could dampen demand,” said Tom Bill, head of UK residential research at Knight Frank.
“With the government promising not to raise income tax, VAT or national insurance, there is speculation about other taxes.”
Meanwhile, there are 74,000 UK-domiciled individuals who don’t pay tax on income earned outside the UK due to potential changes to the rules relating to non-residents.
Meanwhile, close attention will be paid to how existing overseas trusts will be treated for inheritance tax purposes.
Luxury property prices in central London fell 2.4% year-on-year in July but Knight Frank expects this fall to ease to 1% by December.
The impact will be felt less in upmarket suburbs of London, where prices are still expected to rise by 2% this year.
Prices in major countries appear to still be falling from the pandemic “war for space” highs, with the annual decline recorded in June being -3% and prices forecast to fall by -2% in 2024.
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