Election raises hopes on stamp duty

The failure of Chancellor Gordon Brown to make any mention of stamp duty reform in last year's pre-Budget report brought much wailing from the property sector.

The failure of Chancellor Gordon Brown to make any mention of stamp duty reform in last year's pre-Budget report brought much wailing from the property sector.

With inflated house prices, this tax - starting at 1 per cent on any home worth more than £60,000 - is a burdensome extra on the overall bill for first-time buyers. Any favourable changes to its application would have helped generate activity at the lower end of the market.

However, with a general election likely later this year, stamp duty could at last be up for review. As it thrashes out its pre-election manifesto, the Conservative Party is looking at excluding first-time buyers from the tax, while other reports suggest the Labour Party is also considering changes. These are likely to include raising the minimum threshold at which stamp duty is paid. Alternatively, the tax could be applied in the same way as income tax, so that higher rates are paid not on the entire value of the property, as at present, but only on the amount by which this value exceeds upper thresholds.

Research from the Nationwide building society shows that while only 10 per cent of first-time buyers were affected by stamp duty in 1993, more than 85 per cent now have to pay it.

A spokesman says that if the threshold had risen in line with inflation since 1993, stamp duty would today begin at £180,000.

The last time the stamp duty threshold was raised was in 1993, when it doubled from £30,000 to £60,000. Since then, it has produced a ninefold rise in revenue for the government - from £465m to an estimated £4.3bn in the current tax year, according to the Halifax.