Will Gordon Brown scrap stamp duty?
Gordon Brown is thought to be considering a temporary suspension of stamp duty in an attempt to kick-start the flagging property market and spur the economy.
The ambitious plan would be part of a raft of new measures aimed at helping thousands of hard-pressed families who are struggling with the rising cost of living, and unable to contemplate purchasing a new home.
Stamp duty is currently paid at 1% on all homes above £125,001 - £250,000, 3% from £250,001 - £500,000 and 4% for all homes above £500,000. With the Nationwide estimating that the price of an average house is currently £169,316, this means homebuyers need to find £1,693 - on top of all their other expenses such as solicitor’s fees and surveys.
In an interview on BBC Radio 4’s Today programme chancellor Alistair Darling refused to rule out suspending the property tax. "I am looking at a number of measures and I am not going to be drawn on that today because we have not concluded what exactly we need to do," he said. "It is helping people that is important. I want to look at a range of options that will help people."
Unsurprisingly the property industry has welcomed the proposal as a means of giving the struggling housing market a temporary boost. Gillian Charlesworth, a director of external affairs at the Royal Institution of Chartered Surveyors (RICS) believes a stamp duty holiday is a good start. "After having mortgages pulled from beneath their feet from lenders facing the full brunt of the credit crunch, the government certainly needs to help consumers."
However, Nicholas Leeming, director of propertyfinder.com believes that public finances could not sustain a full suspension for long. "The market needs long-term, sustainable reform of stamp duty - starting with redistribution upwards of the tax bands to really stimulate the bottom end of the market."
RICS recently proposed abolishing the controversial tax for all homes under £125,000, replacing it with a two-tiered system. A 2.5% charge would be applied for homes up to £250,000, with a 5% rate applying on homes in excess of this threshold, unlike the current system. This, RICS believes, would lead to a significant increase in housing transactions and would allow the government to help first-time buyers at the same time.
According to official figures, stamp duty has earned the Treasury £31.5 billion over the past 10 years.
A hugely unpopular tax paid on property and share purchases. Stamp duty on property is levied at 1% for purchases over £125,000 (£250,000 for first-time buyers) which then moves up at a tiered rate. For property between £125k and £250k you pay 1%, then 3% from £250k up to £500k and then 4% from £500k to £1m and then 5% for properties over £1m. But unlike income tax, which is “tiered” and different rates kick in at different levels, stamp duty is a “slab” tax where you pay the rate on the whole purchase price of the property. On shares, stamp duty is charged at a flat rate of 0.5% on all share purchases. Figures correct as of May 2011.
This is more usually a feature of car insurance but it can also crop up in contents, mobile phone and pet insurance policies. An excess is the amount of money you have to pay before the insurance company starts paying out. The excess makes up the first part of a claim, so if your excess is £100 and your claim is for £500, you would pay the first £100 and the insurer the remaining £400. Many online insures let you set your own excess, but the lower the excess, the more expensive the premium will be.