Stamp Duty thresholds should double to reflect house price rises

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Higher stamp duty thresholds would be more than double their present levels if they had risen in line with house prices, according to new research by Halifax.

The higher stamp duty thresholds – £250,000 and £500,000 – have been unchanged since their introduction in July 1997 despite a 140% increase in house prices over the period to January 2011.

The Halifax says that if the higher stamp duty thresholds had been increased in line with house price inflation since 1997, the £250,000 threshold would now be £600,000 and the £500,000 threshold would stand at £1,200,000.

The lender claims that the proportion of residential property sales worth over £250,000 and, therefore, attracting a minimum stamp duty rate of 3% stood at 26% in 2010 over five times the percentage of sales over £250,000 in 2000 (5%). There are an estimated five million homes in the UK that are now valued above the £250,000 stamp duty threshold compared with 875,000 in 2000.

38% of first-time buyers are exempt from paying stamp duty due to the temporary increase in the starting threshold from £125,000 to £250,000. Overall, 95% of first-time buyer purchases are now below the £250,000 threshold. Regionally, the South East has benefited most with 73% of first-time buyers now exempt from paying stamp duty due to the doubling of the threshold.

Only 1.1% of residential property sales will be affected by next month’s increase in the stamp duty rate from 4% to 5% for homes worth over £1 million.

Martin Ellis, housing economist at Halifax, said: “There has been a substantial rise in the percentage of homebuyers paying stamp duty at the higher rates over the past decade

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