Hailifax said this highlighted the effects of the failure to increase the thresholds for IHT and the higher rates of stamp duty in line with house price inflation over the past decade.
The amount of stamp duty revenue raised from sales of properties valued at more than £250,000 has risen by 175% from £1.2 billion in 2000/01 to £3.4 billion in 2005/06. 80% of the rise in the total residential stamp duty tax take over the past five years has been due to an increase in the amount raised at the higher 3-4% rates.
IHT revenue was a record £2.1 billion in the first seven months of financial year 2006/07, up £175 million (9%) from the same period of 2005/06. The amount of IHT revenue collected so far this financial year is higher than total IHT revenue collected in 1999/00 (£2.0 billion), seven years ago. Last financial year (2005/06) the government collected £3.3 billion in inheritance tax revenue and projects £3.6bn in revenue in 2006/07.
The average house price in 97 of the 645 (15%) parliamentary constituencies surveyed is above the 3% stamp duty threshold of £250,000. This is more than quadruple the number five years ago when only 21 constituencies (3%) had an average house price above the threshold then. The typical homebuyer in these towns will be faced with a stamp duty bill of at least £7,500. The average house price in 3 constituencies is above the 4% stamp duty threshold of £500,000, with the typical homebuyer facing a stamp duty bill of at least £20,000.
Halifax estimated the number of properties in the UK valued at more than the 2006/07 IHT threshold of £285,000 now stands at 1.5 million, or 8% of all owner-occupied properties. Halifax projected this will nearly triple to 4.2 million properties by 2020 if the threshold is only increased in line with retail price inflation.
Halifax is calling on the government to reform IHT and raise the threshold to £430,000 to allow for house price inflation over the past 10 years and to make a commitment to link the threshold to house price inflation in the future. It estimates this change would cost the Exchequer approximately £1 billion per annum in lost revenue.
If the higher stamp duty thresholds had been increased in line with house price inflation since July 1997 (when the £250,000 and £500,000 stamp duty thresholds were introduced), the £250,000 threshold would now stand at £650,000 whilst the £500,000 would be £1,300,000. Halifax calls on the government to increase the higher thresholds in line with the increase in house prices since 1997 and to commit to index link all the stamp duty thresholds to house price inflation in the future.
Martin Ellis, chief economist at Halifax, said: "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. 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.
"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. We believe the government also should commit to index link all property related tax thresholds to house price inflation in the future."
