With barely two months to go before the end of the stamp duty holiday, the chorus is growing for another extension. But can the government afford it when official figures show it lost almost £4bn in receipts from the tax last year?
The threshold where buyers start paying stamp duty was temporarily raised from £125,000 to £175,000 for a year from September 2008. This was extended to the end of the year in the Budget in April.
According to the Halifax, the result was that an extra 31% of buyers paid no stamp duty. Overall, 63% of all buyers and 83 per cent of first-time buyers were exempt. Just one more reason why the housing market has been so resilient recently.
But the holiday is not the reason why total receipts have fallen so sharply - on those figures it has cost something like £200m.
Compare that with the latest figures from HM Revenue and Customs. They show that the total stamp duty yield attributable to residential property fell from £6.7bn in 2007/08 to just £2.9bn in 2008/09, blowing a £3.8bn hole in the government’s finances thanks to the fall in house prices and (especially) transactions.
Stamp duty has been a huge cash cow for Labour, raising more than £40bn since 1997 thanks to the introduction of higher rates for more expensive homes. Since 2000, stamp duty has been 3% on properties worth over £250,000 and 4% on those worth over £500,000.
Those slabs create all kinds of distortions around the thresholds but it has produced a tax that has three pretty good things going for it in my book - it is next to impossible to avoid and the bill is higher for the rich and for people in London and the South East. Almost half of the take in 2008/09 came from sales in those two regions and from houses worth over £500,000.
Those kind of figures make it hard to see the government bowing to pressure from the 1808 Coalition to abolish the tax in its current form - the fact that 86% of estate agents think it is unfair is another good reason in favour - even if the arguments in favour of a more general reform of property taxation are pretty overwhelming.
However, the coalition might have stronger arguments for extending the holiday - on the one hand, it would benefit thousands of buyers without losing too much; on the other if it helps underpin a recovery that gets transactions going again it could even lead to an increase in the total take.
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