Stamp duty under £500,000 to be axed?

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The stamp duty on a £500,000 property is worth £15,000 to the Treasury. A massive financial headache when you buy your new home.

But some Tory MPs are calling for all stamp duty to be scrapped on properties worth less than £500,000 in an effort to buoy up the finances of an increasingly stretched middle class. How likely is it come off?

Fair?

If it got the green light George Osborne would likely announce it in the autumn statement. Stamp duty is paid at 1% for properties worth more than £125,000, 3% for properties worth more than £250,000 and 4% on those beyond the £500,000 level.

The Mail claims that if the stamp duty threshold - 3% - for properties worth more than £250,000 had climbed in line with inflation then this threshold would be closer to £1.2m.

Last month stamp duty revenues accelerated more than 45% to £1bn, spurred by an increasingly confident South East and London property market, as well as George Osborne's Help to Buy scheme.

50% climb

Yet wind back to a surging 2007/2008 UK property market and stamp duty hit £6.7bn on 1.6m transactions. This year there will be 1m transactions or so, but soaring prices will still see the best part of £7bn raked in by the Treasury. Like estate agent commissions, increasing property prices is good news for Government revenues.

Indeed, the Council of Mortgage Lenders predicts stamp duty government revenues could rise 50% in the next few years to £9bn. "As well as creating market distortions, stamp duty hampers efficient use of the existing housing stock. And by adding to the up-front cost of home-ownership, it is in conflict with initiatives like Help to Buy."

Big in England

Wales and Scotland are now committed to reforming stamp duty, though their own changes to the tax won't help the broader UK picture, given their lower values of properties. England still takes almost 95% of the total stamp duty tax take in total.

Hamptons International recently predicted the average amount of stamp duty paid in England and Wales will be upped from £5,900 in 2013 to £9,200 in 2018. A 56% climb. Revenues from inheritance tax - property related - look also set to soar as a consequence.