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Last Updated: Wednesday, 16 March, 2005, 16:58 GMT
Homebuyers given stamp duty boost
House hunters
Many homebuyers will welcome the chancellor's announcement
The stamp duty threshold has been doubled to 120,000, providing a welcome boost to UK homebuyers.

The move, announced by Chancellor Gordon Brown in his ninth Budget, should reduce the costs for people looking to buy their first home.

Regional house price differences mean that raising the threshold will have a greater impact in the north and west of the UK than in the south east.

Abolishing duty relief on commercial property will help pay for the move.

The chancellor has paid for raising the residential stamp duty threshold by taking back previously given help for business
Steven McGrady, KPMG

The chancellor introduced stamp duty relief on commercial property in deprived areas in his 2002 Budget.

The move was aimed at encouraging firms to set up business in 2,000 poorer areas.

Its abolition will help the Treasury pay for the increase in the residential stamp duty threshold, Steven McGrady, partner at accountancy firm KPMG, told BBC News.

"Doubling the residential stamp duty threshold will cost 250m but abolishing the relief will net them 340m this year," he said.

Mr McGrady estimates its abolition will cost business 1bn over the next three years.

Regional differences

Experts told BBC News that the impact of doubling the residential stamp duty threshold will vary throughout the UK.

Fewer than one in 20 properties sold in London last year cost less than 120,000.

Raising the threshold will have little effect in the south of England but quite a major one in other parts of the UK
Martin Ellis, Halifax

However, in the north east of England, nearly two thirds of properties sold cost less than 120,000.

"Raising the threshold will have little effect in the south of England but quite a major one in other parts of the UK," Martin Ellis, Halifax chief economist, said.

But Mr Ellis does not believe that raising the threshold will reignite the UK housing market.

"Whenever the government has raised the stamp duty threshold in the past, it has had little or no impact on the housing market, this time is unlikely to be different."

Scepticism

BUDGET 2005
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Milan Khatri, chief economist at the Royal Institution of Chartered Surveyors (RICS), told BBC News that raising the threshold will not, on its own, enable first-time buyers to clamber onto the property ladder.

"This grabs some nice headlines in the run-up to an election but doesn't do anything about affordability.

"It will be no easier to get a large-enough mortgage or save a sizeable deposit because of this move."

Tax take

The chancellor's announcement represents the first rise in the stamp duty threshold since 1993.

STAMP DUTY FOR UK HOMES
Up to 120,000 - nil
120,001 to 250,000 - 1%
250,001 to 500,000 - 3%
More than 500,000 - 4%

Then, buyers had a much greater chance of avoiding stamp duty, with close to half a million properties in England and Wales alone costing less than 60,000.

However, average UK property prices have more than doubled in the past six years while the threshold for stamp duty has remained unchanged.

As a result, the number of properties incurring stamp duty has rocketed, as has the government's tax take.

Halifax bank has estimated that revenue from stamp duty on house sales has risen from 465m in 1993-4 to 4.3bn in the current tax year.

"The cost to the government of raising the threshold is small beer compared with the overall increase in the stamp duty take," Mr Ellis said.

Peter Bolton King, chief executive of the National Association of Estate Agents, said that raising the stamp duty threshold was "long overdue".

"Today's change will help in the region of 300,000 homebuyers and offers hope to many more first-time buyers, but it can only be seen as a first step in the right direction," Mr Bolton King added.

Stamp duty changes by region
Region Number of sales under 120,000
North east 35,431 or 65% of sales
Scotland 74,455 or 63% of sales
North west 90,950 or 59% of sales
Yorkshire 62,944 or 58% of sales
Wales 29,189 or 56% of sales
East Midlands 45,139 or 47% of sales
West Midlands 47,040 or 46% of sales
East of England 45,139 or 23% of sales
South west 25,407 or 22% of sales
South east 28,095 or 15% of sales
London 7,096 or 5% of sales
Across UK 475,501 or 37% of sales
Source: Myhouseprice.com (2004 house sale figures)




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