End our property tax misery

By THIS IS MONEY
Updated: 00:00 EST, 5 December 2006

Gordon Brown was today urged to announce massive changes to stamp duty and inheritance tax rates in tomorrow's Pre-Budget Report.

Home buyers have been forced to hand over billions of pounds to the Treasury as stamp duty levels have failed to keep pace with soaring property prices, according to a report from the Halifax. The bank says the surge in property values also means that 1.5m families face having to pay inheritance tax.

Halifax says the combined revenue raised from inheritance tax (IHT) and the higher rates of stamp duty on residential property reached a record £6.7bn in the last financial year.

In particular it points to the 175% rise in revenue from sales of properties valued at more than £250,000 - up from £1.2bn to £3.4bn in the past five years. Between £250,000 and £500,000 buyers must pay 3% of the purchase price.

Halifax says the average stamp duty bill in 97 of the 645 parliamentary constituencies is more than £7,500. In three constituencies the average house price is above the 4% stamp duty threshold of £500,000, with the typical homebuyer facing a stamp duty bill of at least £20,000.

It reckons if the higher stamp duty thresholds had been increased in line with house price inflation since July 1997 - when the £250,000 and £500,000 stamp duty thresholds were introduced - the £250,000 threshold would now stand at £650,000 while the £500,000 threshold would be £1,300,000.

Halifax wants the Government to increase the higher thresholds in line with the increase in house prices since 1997 and to commit to index link all stamp duty thresholds to house price inflation in the future.

On IHT, it is calling on the Government to raise the threshold to £430,000 to allow for house price inflation over the past 10 years and to make a commitment to link the threshold to house price inflation in the future. This, says the Halifax, would cost the Exchequer £1bn a year in lost revenue.

If Gordon Brown fails to act, millions more homes will be dragged into the IHT trap. By 2020 one in every five homes will be worth more than the IHT threshold, says the Halifax.

IHT revenue was a record £2.1bn in the first seven months of the financial year, which began on April 6, up £175m (9%) from the same period of 2005/06. The amount of IHT revenue collected so far this financial year is higher than total collected over the whole 12 months seven years ago.