Osborne pockets £1bn in stamp duty bonanza as house prices soar... but Government borrowing still rises by £10bn

By Hugo Duncan Economics Correspondent

Published: 07:59 EDT, 21 August 2014 | Updated: 19:43 EDT, 21 August 2014

The Treasury raked in more than £1billion from stamp duty in a month for the first time since the financial crisis began, official figures showed yesterday.

Some £1.09billion of the property tax was paid in July – the most since August 2007 – as a booming housing market swelled Government coffers.

The surge in stamp duty receipts, the majority paid by families at a time of rapidly rising house prices, sparked fresh calls for the system to be reformed.

Experts branded it ‘archaic’ and said stamp duty was ‘a strong contender for the worst designed tax’ in Britain. The bands have failed to increase in line with house prices, which some critics say has created a stealth tax. The amount of money raised by the Treasury from stamp duty soared under Labour, before falling off a cliff after the 2008 financial crash. It has now recovered to the pre-crisis peak Despite the increased tax take from stamp duty, public borrowing has soared since 2000, when the Government ran a surplus

Others have attacked the way the levy rises in abrupt steps or ‘slabs’.

Houses sold for up to £125,000 are exempt but properties costing just a penny more carry a 1 per cent stamp duty – which rises to 3 per cent on homes more than £250,000. The tax goes up to 4 per cent for houses worth more than £500,000, 5 per cent for over £1million and 7 per cent for over £2million.

With house prices soaring by more than 10 per cent since last year, more people are being dragged into paying higher rates of the levy.

The Office for National Statistics said last month’s total stamp duty receipts were 23.5 per cent higher than in July 2013. From April to July this year, the tax raked in £3.8billion, or 37.7 per cent more than the same period in 2013. Chancellor George Osborne is under pressure to lift stamp duty thresholds to ease the burden on families moving home In the year to June, there was £5.1billion generated in stamp duty from house sales, Nationwide said Overall, £10billion was generated in taxes from property sales last year, close to the high reached before the 2008 crash

It has not earned the Treasury so much money since before the run on Northern Rock seven years ago plunged the economy into crisis. In March 2009, it was worth just £213million to the Exchequer.

Two thirds of homebuyers are now forced to pay stamp duty. HMRC figures show a quarter of buyers are paying stamp duty of 3 per cent or more – up from just one in ten in 2003.

Stuart Adam, of the Institute for Fiscal Studies, said: ‘It is a strong contender for the worst designed tax in the system. The slab structure is particularly ludicrous.’

The average UK house price is £265,000, attracting a levy of £7,950 when sold, while in London a typical home worth £499,000 would mean £14,970 in stamp duty.

The Institute of Directors’ Stephen Herring said: ‘Significant reforms are overdue … to reflect property price increases.’ Jeremy Blackburn, of the Royal Institution of Chartered Surveyors said stamp duty was ‘an archaic tax structure’.

A Treasury spokesman said the tax is ‘an important source of Government revenue’ that helps fund ‘essential services’.

÷ THE cost of an average home in parts of London is now £1.5million – 42 per cent higher than in 2008, property website Rightmove reveals today.

But prices are up to 13 per cent below their pre-crisis peak in parts of the North.

George Osborne pockets £1bn in stamp duty bonanza as house prices soar
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