The £7,000 stamp duty sting - will Osborne abolish it?


Britain Mortgages

If you've sold a property in the last couple of years you may not have made as much as you thought. Property website Zoopla claims stamp duty "dead-zones" have wiped off £260 million off the value of residential properties in England and Wales since April 2012 - at an average cost of close to £7,000 to each seller. Who's come off worst?

£260m given away

First, what's a dead zone? It's when a property is sold close to a stamp duty threshold, sometimes forcing a house seller to sell it for less than it's worth to make the sale. Zoopla claims sellers whose property values fall in a stamp duty "dead-zone" have slashed prices by £6,990 on average.

For example, one penny over the £250,000 threshold will add £5,000 to a buyer's stamp duty bill. Anyone buying at £250,000 plus is forced to pay three times as much stamp duty than if they bought a house below the 250k threshold, paying 1%.

"The number of sales in the £250,001 - £265,000 price band," says Zoopla, "was 60% short of the expected volume because over 25,000 sold properties were under-priced to keep them below the stamp duty threshold."

Reform wanted

Specifically, there were almost 47,000 sales in the £246,000 and £250,000 mark in the last 24 months but only 15,981 between £251,000 and £265,000. Hopes, then, are being pinned on George Osborne tomorrow to change the law in his Budget.

"An alternative system which removes the distortions is possible without reducing the revenue received via the Stamp Duty Land Tax," says Zoopla's Lawrence Hall. "While a graduated system of land tax will mean some buyers pay slightly more than they would in the current system, overall it will make for a fairer approach to taxing property."

New 500k threshold?

With average UK house prices hitting £250,000 in December - and rates of home ownership under huge pressure - calls for reform continue. Many regard stamp duty as a stealth tax. What about, then, scrapping stamp duty on properties sold for less than £500,000? Or shift the duty burden to the seller?

This would give new Help to Buy home owners a real boost. But stamp duty is a handy earner for the Government, particularly in the last decade. Roll back to 1991, for example, and the average UK house was worth £51,000; many house sales took place without any stamp duty costs at all.

The Government tax take from stamp duty looks likely soar to £9bn by 2017, tripling in a decade, according to recent HMRC estimates.