Azara Blog: Halifax wants stamp duty thresholds raised

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Date published: 2008/03/09

The BBC says:

The average stamp duty bill for first-time buyers has almost doubled over the last five years, says a report from mortgage lender Halifax.

The average bill in 2007 was £1,751 compared with £960 in 2002.

In the South East, South West and East almost all first-time buyers paid stamp duty, while in Northern regions only 42% were liable, the report said.

The Treasury pointed out that half of first-time buyers will pay no stamp duty this year.

The lowest, 1% tax band hits homes worth between £125,000 and £250,000.

Homes valued between £250,000 and £500,000 attract a 3% charge and properties worth more than that are taxed at 4%.

Although the government has raised the threshold at which buyers pay 1%, it has not kept pace with the surge in house prices.

"Stamp duty has again become an issue for first-time buyers because the stamp duty thresholds have not kept pace with house price inflation," said Martin Ellis, Halifax chief economist.

"We call on all political parties to raise the stamp duty thresholds to compensate for house price inflation over the past decade," he added.

Stamp duty has been one of the government's favourite stealth taxes. The high house price inflation of the last decade has meant the government take from stamp duty has rocketed. This tends to indicate that perhaps the government likes high house price inflation. As do the banks (such as the Halifax) and estate agents and developers. For just about everybody else, high house price inflation is bad. And this is the real underlying issue here, not how much first-time buyers happen to pay in stamp duty on average.

Of course there is one issue about stamp duty that is worth mentioning, namely that the rate is absolute, not marginal. That is totally stupid, but funnily enough the Halifax doesn't seem too concerned about that.

Also, since the rate does not vary from region to region, it is also quite obvious that stamp duty represents a massive subsidy of the parts of the country with relatively low house prices by parts of the country with relatively high house prices. So, for example, as mentioned in the article, pretty much all first-time buyers in some regions pay stamp duty, while less than half in others do. But there is an analogous situation with respect to income tax, so stamp duty is not unique in this regard.

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