Londoners pay £1bn in stamp duty

GORDON BROWN is reaping more than £1bn a year for Government coffers in stamp duty from the London property market.

The Evening Standard, sister newspaper to This is Money, can reveal that the total collected by the Treasury from London property buyers has passed the landmark figure for the first time. The average property buyer in the capital now hands over £6,017 in stamp duty.

The figure - uncovered from Inland Revenue statistics - will add weight to calls for the Chancellor to ease the burden of what is seen as an unfair tax on London in next week's Budget.

The amount the Government pockets from the London property market has risen six-fold since Labour came to power in 1997, when stamp duty raised just £165m.

Across the UK the Treasury now collects almost £3.8bn in stamp duty - enough to pay for the Government's overseas aid budget.

Economists said the tax had become one of the Treasury's favourite levies because of its extraordinary growth rate and ease of collection.

Martin Ellis, chief economist at Halifax, said: 'It has become such an easy way for Gordon Brown to raise money. It is a clear stealth tax that lets the property market do the work for him.

'We think it is time for him to raise the threshold to £157,000 to reflect the house price inflation there has been since 1993.'

The Chancellor is under intense political pressure to grant concessions to first-time home buyers, with opposition parties condemning the tax as 'immoral' and 'unfair'.

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Liberal Democrat Treasury spokesman Vincent Cable said: 'It has become a very unfair tax because hundreds of thousands of low-income families buying very modest homes in London are now having to pay it.

'It is the down-side of the property boom. If you are a first-time buyer you already have to find cash for the deposit, the lawyers' fees and the survey-the extra few thousand pounds for the stamp duty can be the final straw.'

The stamp duty threshold has stayed at £60,000 since 1993, when it was doubled from £30,000. It now affects almost 90% of first-time buyers.

Since taking office, Gordon Brown has introduced two higher stamp duty rates, for purchases over £250,000 and £500,000, and raised them twice. The rates now stand at one per cent for property purchases between £60,000 and £250,000, 3% for purchases over £250,000 and 4% for those above £500,000.

Buyers paying £250,000 for a home have to add £7,500 to their mortgage to cover the duty. Someone paying £1m has to find an extra £40,000.

The Inland Revenue figures show that London and the South-East accounted for almost half the total raised from stamp duty in the 12 months to April 2004, bringing in £1bn and £830m respectively.

The tax, introduced in 1694, has raised £16bn for the Chancellor since Labour came to power. In 1993 stamp duty on residential property raised just £280m, but the total is estimated to hit £4.3bn in the current financial year.

Mr Cable, MP for Twickenham, has proposed raising the threshold to £150,000, in effect abolishing the tax for about 500,000 people a year.

The Tories have also indicated that they want to raise the threshold, promising to detail their strategy after the Budget.

Shadow chancellor Oliver Letwin has said it was 'immoral' for so many Londoners on average incomes to be forced to pay such high stamp duty. 'It is a classic stealth tax,' he said.

Last Thursday a 22,000-signature petition was handed to the Chancellor as part of the West Bromwich Building Society's Raise the Roof campaign, backed by 44 MPs and the Royal Institution of Chartered Surveyors.