Stamp duty causing concern
The government is coming under increasing pressure to tackle the growing problem of stamp duty, which is causing serious problems in the housing market.
By David Field
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The debate over stamp duty has flared up once again, as the government comes under increasing pressure to raise the threshold for the tax.
Stamp duty is the tax on the sale of all properties in the UK over the price of £125,000. The amount of tax raked in by the government depends on how much the property costs, but a new report has warned that an increasing number of people are being dragged into higher and higher bands because of the huge rate of price inflation in the property market.
Over recent year, property prices have rocketed and despite a cooling of prices in 2005 and 2006, property prices still remain sky high. However, the raising of the stamp duty thresholds have not kept pace with this price inflation and as such more and more people are facing high taxes on their property purchases.
The latest figures have discovered that there has been a staggering 281 per cent increase in purchases above the £250,000 threshold, as prices continue to rise. As such, many people feel that they are being taxed unfairly, because the thresholds have remained low. While the chancellor did raise the threshold at which the tax kicks in from £60,000 to £120,000 in 2005, it is now felt that further changes to the stamp duty regime are needed.
Not least, first time buyers need help if they are to get onto the first rung of the property ladder. With prices soaring, many people are finding it difficult to scrape together enough money to afford a first property. Once they do have enough for the price itself, stamp duty can often be one step too far and therefore campaigners believe that the future of the property market is relying on stamp duty being reformed. If it is not, and more people are kept off the property ladder, the whole market could suffer in future as it will become increasingly top-heavy, with no new blood coming into the market to take up the cheaper housing.
A recent report from the Homebuyer Show found that inflation-busting salary rises are now considered the most likely way for first time buyers to get onto the property market, as 39 per cent of respondents see a good salary as the only way they will be able to get onto the property ladder. As people continue to struggle to get onto the property ladder, the government will come under increasing pressure to change the stamp duty system altogether, as many consider it an outdated form of tax.
However, Mr Brown gave no suggestion in his pre-Budget report at the end of last year that he would be interested in changing the scheme, meaning it will be an uphill struggle for campaigners to persuade the chancellor to change his mind before April's Budget.
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