Stamp duty bleeds the middle classes By David Derbyshire and Brendan Carlin
Daily Telegraph (Filed: 02/11/2005)
Home buyers paid a record £5.5 billion in stamp duty last year, prompting new accusations yesterday that the Government is presiding over a "property stealth tax".
Over the past year the amount of stamp duty pouring into the coffers of Gordon Brown, the Chancellor, rose by almost 50 per cent, new figures showed.
Revenue from the tax has increased eightfold since Labour came to power in 1997. Stamp duty on house sales now generates more money for the Chancellor than spirits and beer duty combined and is fast approaching the level raised by tobacco tax.
The figures emerged as council tax payers in England were warned that they could face a £100-a-year increase on their bills unless the Government plugged a £2.2 billion "black hole" in its finances.
Although critics say the Chancellor has presided over an unprecedented number of "stealth" tax rises, few are as unpopular as stamp duty. Over the past few years rising house prices have dragged millions of homes over the threshold for the duty, with London and the South East, where house prices are highest, bearing the brunt.
Caroline Spelman, the Conservative local government spokesman, accused the Government of squeezing home buyers dry.
"Stamp duty is yet another stealth tax," she said. "It is clearly being used to enrich the Treasury at the expense of home owners.
"What they have failed to do is adjust the stamp duty threshold to reflect the huge increase in house prices. For the whole nation, the average stamp duty has gone through the £1,000 barrier, while for London it is around £6,000. This is a tax on London and the South East, and on middle England."
The year before Labour came to power stamp duty on house sales raised £675 million.
At that time 610,000 people paid the tax when buying a house. Inland Revenue figures show that by this year, about 1.2 million home buyers were paying, which generated £5.49 billion for the Treasury.
The stamp duty threshold has failed to stay in line with average house prices, which have risen from £68,000 in 1997 to £170,000.
The lowest threshold was frozen at £60,000 between 1993 and March this year - a period of dramatic house price inflation.
Over the same period, Mr Brown increased stamp duty four times. Although he gave in to pressure and doubled the lowest threshold to £120,000 in March, the higher thresholds remain untouched.
Today, stamp duty is charged at one per cent on homes sold for £120,000 to £250,000, three per cent between £250,000 and £500,000 and four per cent for those above £500,000.
"This is a stealth tax," said Martin Ellis of the Halifax. "Rising prices have dragged a lot of properties into the net and also into the higher rates. This hits first-time buyers particularly.
"The Government doubled the lower threshold, but there aren't many houses in London and the South East that are exempt. We would like to see them linking thresholds to price inflation."
Last year's increase in revenue from stamp duty was fuelled by increases in house prices of 17 per cent in 2003 and 14 per cent in
2004. The number of people buying a home also increased from 1.5 million in 2003-04 to 1.7 million in the last financial year.London and the South East pay the lion's share, each contributing more than £1 billion to the Treasury. When the number of people living in each region is taken into account, a huge North-South divide emerges. In London, every man, woman and child pays the equivalent of £173 in stamp duty, while in the South-East the figure is £148.
In the North-East, where house prices are lower, people pay the equivalent of £44.
A Treasury spokesman said: "In the Budget the Chancellor doubled the starting threshold from £60,000 to £120,000.
"As a result, half of all first-time buyers and 45 per cent of all house purchases are totally exempt from duty, and five in every six purchases pay either no stamp duty at all or duty at the one per cent level."
The Local Government Association said council tax bills could rise by £100 next year unless ministers filled a £2.2 billion shortfall. This prompted the Office of the Deputy Prime Minister into denouncing the LGA for using "fantasy" figures and "crying wolf" yet again.
But council leaders insisted their figures were correct and said only a last-minute £1 billion injection from Mr Brown in December prevented bills rising by almost 10 per cent.