Effective from 2 November 2022, buyers of Guernsey residential property need to consider whether they may, or may not, need to pay more document duty tax.
Two main changes to the tax have been implemented since the States’ approved budget this month.
The first is to provide downsizing relief to property buyers should certain preconditions all be met.
For example, the ‘target’ property needs to be physically smaller (25% to be exact, by reference to its Tax on Real Property assessment), and the property being sold must have been the seller’s principal private residence for the preceding two years prior to sale.
If those criteria can be met, then the starting point is likely to be that the first £400,000 of the purchase price of the smaller property will be free of tax.
A rationale for this relief is that larger properties can then be made available for, say, relocating families, or those who simply need more space. ‘Downsizers’ would arguably be less financially burdened (or be persuaded to move) if a certain amount of tax is saved for them on their onward purchase. It is presently the intention that this relief is time limited, so the benefit will end on 31 December 2024. It is not possible to take advantage of the relief more than once.
The second change is to distinguish between investors and those who are buying their home to live in (their principal private residence).
In the case of the former, document duty rates across all bands will increase by 2%. So, if the prevailing rate of tax levied was 2.25% for the particular increment of the purchase price, then that would increase to 4.25% and so on.
In the case of the latter, namely homebuyers, document duty rates presently remain unchanged.
It is too early to see if the tax adjustments will affect transaction levels, tax received, market sentiment or stock availability, but as other Western economies have demonstrated, fiscal steps do need to be taken to adapt to changing financial landscapes.
Ferbrache & Farrell’s Property Team is always on hand to assist you through the conveyancing process, and happy to provide essential guidance.