Alistair Darling, the Chancellor of the Exchequer, will deliver his first Budget on 12 March. Many would-be home buyers are hopeful that he will include a revision of stamp duty land tax to bring it in line with house prices. The National Association of Estate Agents, the Council of Mortgage Lenders and the Conservative party are some of the organisations that have tried to persuade Mr Darling to update this most outdated of taxes.
The last time stamp duty went through a major overhaul was in 1997, more than a decade ago. Before then, stamp duty was charged at a flat rate of 1% paid by buyers on all property valued at more than £60,000 and you paid it on the whole value of the property if you breached that threshold – so no 'zero rate' band.
In 1997, Labour introduced two new tax bands of £250,000 to £500,000; and £500,000 plus, which have remained the same ever since. However, the percentage paid on stamp duty has been increased since then - rising from 1.5% to 3% on properties between £250,000 and £500,000; and from 2% to 4% on properties worth more than £500,000. You pay the tax not in incremental steps (as you do with income tax) - if your property value takes you into the top band, you'll pay that percentage on the whole value.
The initial threshold band of 1% on £60,000 was revised in 2005 to £120,000 and raised again to £125,000 in March 2006.
The average price of a Chiswick property is £635,052, up by 22.4% compared with the same period last year (chiswickw4.co.uk). No wonder stamp duty is perceived as being a stealth tax as the majority of properties locally are in the higher rate.
Anywhere in London and the South East £250,000 would buy a fairly modest home (if you can find one at all at that price) yet the stamp duty would still be £7,500, rising to 20,000 for a price tag over 500,000. Stamp duty is a real bugbear for first time buyers. Post-credit crunch, they're being asked to find ever larger deposits. Many buyers have to add the cost of stamp duty into their mortgage meaning that they are now paying interest on it as well.
