Published on : Sat, 05 Nov 2005 07:04GMT
by : Paul Dyson

LONDON: Homebuyers in Britain shelled out 5.5 billion pounds to pay stamp duty in 2004, according to official figures. This signified a 50 per cent increase and has some critics naming it as yet another stealth tax adopted by the Labour government.

Stamp duty from house sale transactions generate more funds to the treasury than say duty on other items like spirits and this revenue has increased almost eight-fold after the Labour Party came to power in 1997.

Government's critics describe the duty as a stealth tax. The calculations followed a revelation of a 2.2 billion shortfall in federal finances and that each council tax payer would have to pay an additional 100 pounds on their bills annually to cover up this deficit.

According to figures available from HM Revenue and Customs, stamp duty was levied on 610,000 people while buying a house in the year before the Labour Party came to power, raising 675 million pounds in revenue. This year, some 1.2 million homebuyers have paid the duty, which generated 5.49 billion pounds.

Critics point out that the stamp duty threshold has not stayed in line with average house prices, which have risen from 68,000 pounds in 1997 to 170,000 pounds this year. The treasury led by Chancellor Gordon Brown increased the stamp duty four times during this period. Today, the stamp duty rates are 1 per cent on homes sold for 120,000 pounds to 250,000 pounds, 3 per cent for those sold between 250,000 pounds and 500,000 pounds and 4 per cent for those sold above 500,000 pounds.

Describing the levy as a stealth tax, Halifax's Martin Ellis said rising prices have dragged a lot of properties into the net and also into the higher rates. This hits first-time buyers particularly.

The highest levels of the duty prevail in London and the South East, where the house prices are at its peak. Each area contributed more than 1 billion pounds.

A Treasury spokesman said the Chancellor had doubled the starting threshold from 60,000 pounds to 120,000 pounds and as a result half of all first-time buyers and 45 per cent of all house purchasers are totally exempt from the duty, and five in every six purchasers pay either no stamp duty at all or duty at the one per cent level.