Property views: Time to abolish stamp duty?

Search: Latest house price figures

- Read more Pryor on Property features
- Share your thoughts on the property market

I was reading in the Guardian in early January about the amount of Stamp Duty revenue that the Government will lose in the downturn and noticed that, as with a similar article in the Telegraph a couple of weeks later, the duty from shares and inheritance tax, as well as stocks and shares, all seems to be lumped together and the loss is 'anticipated' rather than factual.

Just to remind you, here are the duty bands on property: 1% on 175k to £250 homes, 3% on £250k to £500k purchases and 4% on £500k or more.

Crunching the numbers

So, snowed in for the past week, I put the old Amstrad to work, taking each sale recorded by the Land Registry and calculating the Stamp Duty that would have been payable. I did this for both the calendar years 2007 and 2008.

Not surprisingly, considering the 53% fall in transaction numbers, the total Stamp Duty take from house sales for Alistair Darling fell but the figures aren't as bad as the £15bn that had been mentioned. The actual loss in 2008 for just house purchases was just an eye-watering £2.77bn!

I broke the numbers down by Stamp Duty Band to illustrate that sales at both the top and bottom of the market seem to have been equally affected although the number of sales at the bottom of the housing ladder seem to have held up better than those that are more expensive although this may just be creative accounting.

But just what does £2.77 bn equate to? When billions are being given to banks it's easy to loose hold of what a billion pounds actually looks like. Here's a few ideas:

It's about the total amount raised by the TV license fee, or the cost of roughly ten new NHS hospitals.

Or if size matters, it's about the cost of the new aircraft carrier HMS Queen Elizabeth.

And perhaps, rather topically just now, it's just a couple of million more than the Government bail out for car manufacturers.

A billion here...

American Senator, Everett Dirksen, is famously quoted as saying "A billion here, a billion there and pretty soon you're talking about real money&quot. Government spending is rocketing while billions of pounds of tax take has been evaporating and there is little prospect of the situation improving in 2009.

As an initiative, raising the stamp duty threshold last autumn has proved as impotent as we had warned. However, the wholesale scrapping of Stamp Duty could still make a considerable difference to home buyers who now have to find an extra 10-15% just for a deposit.

As lenders have forced up the amount that buyers have to save, those wanting to buy a home for £300,000 have to save an extra £9,000 to pay the Stamp Duty and those spending £500,000 are having to find £20,000 - all out of taxed income. That's an extra 4% they have to save before they can buy.

Ditching one of the most hated taxes

Many in the housing industry are beginning to openly question whether the current housing minister, the eighth since Labour came to power and her colleagues in Government really do understand what is really going on in the housing market.