House tax holiday: would it work - and can the government afford it?
Monday, August 18, 2008
In the past decade, home buyers have paid the government £32bn in stamp duty, with the annual amount rising dramatically as the housing market soared and increasing numbers of properties were caught by the tax.
According to the Halifax, just over a quarter of the privately-owned homes in the UK, more than 5.5m, were valued above £250,000 at the end of last year, the threshold at which stamp duty is levied at 3% of the property's value. In 2002, there were just 1.8m properties valued above £250,000.
A family buying the average-priced home in Greater London, currently £291,500, would pay the Treasury £8,745 in tax.
The government has enjoyed a large increase in revenue from stamp duty since Labour came to power in 1997. That year, the yield from residential properties was just £675m. Increases in the rate of tax combined with the impact of rising house prices meant the Treasury collected £6.4bn from stamp duty on homes last year. However, that figure will fall dramatically this year as the housing market has hit a wall and the number of transactions has plummeted to record lows.
Under the current regime, there are four stamp duty bands. Buyers of homes worth less than £125,000 pay nothing. Between £125,000 and £250,000, buyers pay 1% on the price of the home; between £250,000 and £500,000, buyers pay 3% of the price; and above £500,000, they pay 4%. There were 1m properties in the UK valued at more than £500,000 at the end of last year, a threefold increase in the past five years, according to the Halifax.
Consumer groups, mortgage lenders and house builders have lobbied for the lifting of the current thresholds to keep them in line with rising house prices, and those calls have become louder as the housing market has been paralysed by the credit crunch. First-time buyers are under particular pressure as the banks' lending criteria have become tougher and they are being forced to find much larger deposits.
If the higher stamp duty thresholds of £250,000 and £500,000 had increased in line with house price inflation since July 1997 when they were introduced, they would now stand at £720,000 and £1.44m, the Halifax said.
Read more at Guardian Economics
According to the Halifax, just over a quarter of the privately-owned homes in the UK, more than 5.5m, were valued above £250,000 at the end of last year, the threshold at which stamp duty is levied at 3% of the property's value. In 2002, there were just 1.8m properties valued above £250,000.
A family buying the average-priced home in Greater London, currently £291,500, would pay the Treasury £8,745 in tax.
The government has enjoyed a large increase in revenue from stamp duty since Labour came to power in 1997. That year, the yield from residential properties was just £675m. Increases in the rate of tax combined with the impact of rising house prices meant the Treasury collected £6.4bn from stamp duty on homes last year. However, that figure will fall dramatically this year as the housing market has hit a wall and the number of transactions has plummeted to record lows.
Under the current regime, there are four stamp duty bands. Buyers of homes worth less than £125,000 pay nothing. Between £125,000 and £250,000, buyers pay 1% on the price of the home; between £250,000 and £500,000, buyers pay 3% of the price; and above £500,000, they pay 4%. There were 1m properties in the UK valued at more than £500,000 at the end of last year, a threefold increase in the past five years, according to the Halifax.
Consumer groups, mortgage lenders and house builders have lobbied for the lifting of the current thresholds to keep them in line with rising house prices, and those calls have become louder as the housing market has been paralysed by the credit crunch. First-time buyers are under particular pressure as the banks' lending criteria have become tougher and they are being forced to find much larger deposits.
If the higher stamp duty thresholds of £250,000 and £500,000 had increased in line with house price inflation since July 1997 when they were introduced, they would now stand at £720,000 and £1.44m, the Halifax said.
Read more at Guardian Economics
Labels: Alistair Darling, Bank of England, credit crunch, Gordon Brown, Halifax, House Tax, Mortgage rates, negative equity crisis, property analysis, Stamp duty changes, uk housing
