Stamp duty holiday reaches the end

Thursday, 31 December 2009 12:00

Stamp duty on properties between £125,000 and £175,000 returns to one per cent tomorrow as the government-imposed holiday on the tax comes to an end.

The stamp duty holiday was introduced in September 2008 and was intended to last for a year. But the scheme was extended until the end of 2009 in April's Budget.

Analysis by the Council of Mortgage Lenders (CML) of how the holiday has affected consumers reveals 57 per cent of people buying a property with a mortgage did not have to pay in the first quarter of 2009.

However, house price increases and a shift in the market towards higher value properties meant, by the third quarter of the year, just 51 per cent had benefited.

In the meantime, the CML estimates, the government spent just £356 million on the scheme in the first 12 months - a little over its estimate - because of low transaction levels.

Forecasts to the end of this year estimate the total spend will be just under £500 million.

James Tatch, senior statistician for the CML, 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 it's budget' on this by the end of the year."

The advantages of the holiday were also felt more positively in areas of the country with low house prices, the CML said.

More than three quarters of transactions in the North were exempt from stamp duty after a year of the tax holiday being implemented.

But, in London, only 17 per cent of buyers escaped paying stamp duty. According to the CML the capital accounts for 13 per cent of house purchase transactions, yet only six per cent of borrowers were helped by the tax break.

The CML said it supported a fundamental reform in stamp duty and admitted that while its abolition would be the best option a more graduated structure would be an improvement.

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