Darling axes stamp duty for properties under £175,000

The Government has suspended stamp duty on properties costing less than £175,000 in a bid to revive the UK’s ailing housing market. Earlier this month the Chancellor announced that the unpopular tax will not apply to residential property purchases for one year from 3 September 2008.

Alistair Darling had been accused of ‘dithering’ over possible plans to reform stamp duty which, according to experts, has contributed to the recent stall in new property purchases.

By raising the stamp duty threshold from £125,000, however, the Government estimates that half of all property transactions will now be exempt from the tax.

‘We are facing difficult times’

Announcing the freeze, Darling said: ‘We are facing difficult times - we are in a situation where you are facing the combination of the credit crunch with high oil and food prices. We haven’t seen this since the 1930s.

‘I believe the package we have announced today will help us get through what is undoubtedly a difficult time. I am optimistic that we will get through it,’ he added.

Following the reforms, stamp duty is now charged at 1% on properties sold for between £175,000 and £250,000, with the tax rising to 3% above this level. Homes worth more than £500,000 attract stamp duty at a rate of 4%.

A mixed reception

While the UK’s biggest mortgage provider, Halifax, has applauded the move, the Council of Mortgage Lenders insists the change doesn’t go far enough. A spokeswoman for the Council said: ‘While any initiative to try to help the housing market is welcome, this particular move doesn't go far enough in terms of the starting threshold and it is also getting close to the £250,000 threshold.

‘The level of transactions this year is lower than last year and, while it means that around 40% of transactions won’t be caught, it is questionable whether it will incentivise buyers who wouldn’t have entered the market anyway.’

The stamp duty holiday, which will save buyers a maximum of £1,750, came as the first major move in the attempted Autumn re-launch by Gordon Brown, who also announced a raft of measures to help home owners who facing repossession.

Other plans unveiled include the introduction of a new loans system for families with income totalling less than £60,000 per year. The HomeBuy Direct scheme will provide interest-free loans of up to 30% on new properties for a maximum of five years.

Meanwhile, latest figures show the average price of a UK home has fallen by more than 10% in the last year, while new mortgage approvals dropped to just 33,000 in July – down by 71% on 2007.

While some of the principals of property taxation, such as stamp duty, may seem relatively straightforward, other areas can prove more complex. Please contact us if you have any concerns.