Inheritance tax and stamp duty soar
Tuesday, 05 December 2006 12:00
Rising house prices mean the amount of money Britons are handing to the government in inheritance tax and stamp duty land tax has soared in recent years.
Calculations from Halifax show homeowners paid £6.7 billion in the taxes in the last financial year.
Since their introduction in 1997, the three and four per cent bands of stamp duty (which come into effect when homes are worth £250,000 and £500,000 respectively) have not been increased. In the same period house prices have risen 162 per cent.
Additionally, the lower threshold of stamp duty has not been increased in line with average house prices with only two rises since 1993.
While inheritance tax thresholds have risen consistently - they still have not risen as fast as house prices, with 72 per cent more households paying the tax now than did just five years ago.
"More and more parts of the country are now being impacted by property-related taxes as the thresholds for both inheritance tax and the higher rates of stamp duty have not kept pace with house price inflation," said Halifax chief economist Martin Ellis.
"Smaller inheritances, reliant mainly on the family home, are more likely to attract a 40 per cent rate of inheritance tax than five years ago, while stamp duty bills of more than £7,500 are becoming more common."
The average house price means people are paying more than £7,500 in stamp duty in 97 parliamentary constituencies (one in seven). This is more than four times as many as five years ago.
Inheritance tax - charged at 40 per cent of all assets passed on above its threshold - is also seeing record revenues. Projections show an estimated £3.6 billion will be collected through the tax this year - more than 75 per cent higher than in 2000.
"We call on the government to raise the higher stamp duty thresholds and the inheritance tax threshold in line with the increase in house prices over the past decade," Mr Ellis said.
"We believe the government also should commit to index link all property related tax thresholds to house price inflation in the future."
The inheritance tax threshold would have to rise from £285,000 to £430,000 to allow for house price inflation in the last ten years, Halifax calculates.
Additionally, if the higher stamp duty thresholds had risen in line with house price inflation since their introduction in July 1997 the £250,000 threshold would now stand at £650,000 while the £500,000 threshold would now be £1,300,000.
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