Anger as chancellor freezes stamp duty

The chancellor has announced a freeze on stamp duty, the tax paid on the purchase of properties.

No one was expecting any gifts from Gordon Brown on stamp duty, but his decision to freeze thresholds rather than increase them, at least in line with inflation, will anger many in the property industry. The freeze will effectively amount to an increase in revenue as house prices continue to rise.

The National Association of Estate Agents said: "With inflation at 2.4% and house prices continuing to rise annually, he is effectively increasing the number of homebuyers who are now liable for this tax. Figures from the Inland Revenue reveal that ?3.59bn was raised from stamp duty in 2003/2004, up 330% compared to ?830m in 1999/2000.

"The government has once again ignored calls from the NAEA, along with the rest of the property industry and the general public to bring stamp duty rates and thresholds in line with the housing market in the 21st century. Major adjustments are needed to these levels to ensure the tax is a fair one, and remove what is now a serious barrier to first time buyers looking to get onto the property ladder."

Ray Boulger, senior technical manager at mortgage broker Charcol said: "Whilst it is disappointing that Stamp Duty remains an unfair tax it is good news that it has not been increased.

"This tax has become one of the Chancellor's biggest stealth taxes and is now hitting hard many first time buyers & other homeowners that it was never targeted at."

Thanks to a seemingly inexorable rise in house prices, the number of people paying stamp duty has rocketed from around 600,000 in 1997 to 1.2 million people today, generating the chancellor some ?3.6bn in tax, compared with ?675m seven years ago.

Homebuyers pay no stamp duty on properties costing ?60,000 or less. From ?60,001 to ?250,000, stamp duty is charged at 1%, from ?250,001 to ?500,000 it is charged at 3%, and properties over ?500,001 are taxed at 4%.