Cost of stamp duty freeze nears £500m

The Council of Mortgage Lenders has calculated the first year of the exemption cost the Treasury £356 million in lost revenue, compared with a predicted cost of £615 million, because of the low number of property sales.

The scheme, which temporarily raised the threshold for the tax on house buying from £125,000 to £175,000, was originally due to run for a year from September 2008, but was later extended until the end of 2009.

Even with the extension, the CML estimates the final cost of the scheme will be less than £500 million.

CML senior statistician James Tatch, who undertook the analysis, said: ‘We may see some surge in activity at the end of the year as borrowers rush to beat the deadline on the stamp duty concession before it ends.

‘This may bring the total benefit to consumers (and cost to the Treasury) nearer the government’s original estimate, but there is no realistic chance of the government “spending its budget” on this by the end of the year.’

The CML found the concession has been of most benefit in areas with lower house prices, such as the northern regions, but has had little impact in London and the south east where the majority of homes sold are above the £175,000 limit.

The body is calling for fundamental reform of stamp duty.

In a statement it said: ‘While abolition would be the best option, a move to a graduated structure would be an improvement on the current system, even if done on a cost-neutral basis.

‘While the temporary concession was welcome as far as it went, it is disappointing that the government has not sought to implement this desirable reform of an anachronistic tax.’

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