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Budget2000 Tuesday, 21 March, 2000, 20:12 GMT
Stamp duty rise hits house buyers
As widely predicted, Gordon Brown has raised stamp duty on property purchases over 250,000.

  • Between 250,000 and 499,999, the rate rises from 2.5% to 3%.

  • Above 500,000 it is up from 3.5% to 4%.

    There is no change below 250,000, which means on properties up to 59,999 there is no charge and from 60,000 to 249,999 the rate remains at 1%.

    These increases are in addition to the already announced abolition of tax relief on mortgage interest payments.

    Killing two birds

    The government had already signalled that stamp duty had assumed an increasingly important role in generating revenue, and another increase was widely predicted.

    For Mr Brown, it very neatly kills two birds with one stone. On the one hand, it helps to choke off a boom in the housing market in the South-East, which if allowed to run out of control could stoke up inflation.

    On the other, it is seen as a way of increasing tax revenues without becoming too unpopular.

    The rates applying to property purchases were raised by 0.5% in the 1999 Budget with hardly a squeak in response, while an equivalent increase in income tax rates would have caused uproar.

    The government also had the ready excuse of seeking to fulfil its obligation to harmonise taxes with the rest of the European Union, where the average equivalent rate of about 6% is still well above the top rate in the UK.

    Neil Ross, managing director of Standard Life Bank, said: "Although we would never want to see our customers experience an immediate increase in the costs of moving house we believe anything that takes the heat out of a potentially over-heating housing market must be a good thing for borrowers in the long term."

    Stamp duty on shares

    There had been representations from City institutions for the 0.5% stamp duty rate on share purchases to be scrapped.

    It is felt that this is encouraging companies to list outside the UK, taking business away from London.

    But the chancellor declined to act on this point - prompting the Association of Private Client Investment Managers and Stockbrokers to call for an urgent review.

    They said Mr Brown had set a process in motion which would "hand UK jobs to foreign financial centres on a plate".

    "It only takes a mouse click for a company to move its business from one trading environment to another.

    "And in this era of European mergers and acquisitions, firms have every opportunity to choose the exchange on which they want to be listed, and they will all surely want to be listed in the most favourable tax environment."

    Brown-field sites

    The chancellor had been lobbied to introduce tax measures to encourage building development on brown-field sites, as recommended by the Rogers Report.

    He said there was a strong environmental case and that the paymaster general would be consulting in detail on the proposals.


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    See also:

    16 Aug 99 | Business
    07 Jan 00 | Business
    05 Mar 00 | Business
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