Gordon Brown's
decision to raise the stamp duty land tax threshold to £125,000 in
the Budget today has been described as "derisory".
Stamp will now be charged at one per cent of the value of all
properties sold worth between £125,000 and £250,000 (except in
disadvantaged areas), three per cent of the value of all properties
sold worth between £250,000 and £500,000, and four per cent of the
value of all properties sold worth more than that.
The four per cent increase in the lower limit of the tax is broadly in
line with the annual increase in house prices - however, with no
increase in the lower threshold for the ten years preceding last
year's increase, analysts feel this rise will not be enough to boost
the market.
In fact, by only increasing the lower threshold in line with house
prices, the chancellor has ensured that he will gain even more revenue
from properties trading above this level, while ever more homes move
up into the unchanged £250,000 and £500,000 bands than was
previously the case. "While any increase in the stamp
duty threshold helps alleviate pressure on first-time buyers, the fact
remains that this tax is ripe for a complete overhaul," said
Adrian Coles, director general of the Building Societies Association.
"The current 'slab' system means that you get big increases in
tax once you jump over a threshold. It also means that there is an
artificial grouping of sales just below each threshold. A graduated
system would avoid this." The Royal Institution of
Chartered Surveyors (Rics) went further. "The rise
[in stamp duty] is so small as to be derisory and represents a
squandered opportunity," it said today.
"Rics is extremely disappointed that the chancellor has not gone
further and raised the threshold to £150,000 as Rics has consistently
argued over recent years. "Furthermore, Rics is dismayed
that the chancellor has once again not seen fit to address the
fundamental structure of stamp duty, which distorts prices in the
housing market by creating pinch points below the threshold for each
band."
The Council of Mortgage Lenders points out that 29,000 more households
would have escaped stamp duty if the starting threshold had been £125,000
last year. But about 56,000 households became liable for stamp duty
purely as a result of house price rises last year alone.
Rightmove, which monitors the vast majority of properties currently on
the market, shows that just 0.5 per cent of the properties on the
London market fall between £120,000 (the old stamp duty threshold)
and the new threshold of £125,000. Nationally, this figure rises to
1.8 per cent of the market - but it is a tiny proportion, and unlikely
to have an impact on the market. "The new threshold of the
stamp duty will not affect the housing market," Rightmove said
today.
"The supply of property under £125,000 is very limited.
Affordability constraints will reach a level where buyers’ ability
to pay more for their home will be limited by the level of their wage
increases. "This is especially true for first-time buyers
who have traditionally formed circa 40 per cent of all buyers. While
the market is less dependent on them than before, the threshold would
have to be set at £166,000 for 40 per cent of property for sale
across England and Wales to be excluded all together from the burden
of stamp duty. At a regional level the threshold would be highest in
Greater London (£238,000) and lowest in the north (£128,000)."
Article by Myfinances.co.uk April
2006
|
How
to avoid Stamp duty
STAMP
DUTY RATES
Budget
2006
Sell property at maximum price
only
£14.97
The
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Find a local House
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