UK Chancellor's Faux Pas Over Abolition Of Homebuyers' Stamp Duty

Jason Gorringe, Tax-news.com, London

05 April 2001

The UK government is not looking as competent as it perhaps should given that the general election is just a matter of weeks away. It popularity might wane further still now that Chancellor Gordon Brown has made a major gaffe over the abolition of stamp duty on house purchases in the UK's poorest areas, a measure promised back in November 2000 and due to take effect this month.

But Gordon Brown has apparently been forced to postpone his nice little vote-winner until at least after the general election, scheduled for June 7, because he doesn't yet know exactly where all the poorest areas are.

The UK's stamp duty is the tax that no one really understands nor wants to pay. For a start, its an antique tax. First introduced in Britain in 1694 to contribute towards the continuing war with France, it was kept on after the war ended. The duty was later imposed on the transfer of property during house sales in 1808.

These days, people in the UK only pay stamp duty if the house they are purchasing is valued at more than £60,000. After this threshold, a percentage of the purchase price is paid which goes to the Inland Revenue. Gordon Brown set out his plans last year for the stamp duty, which were expected to be attractive to first-time buyers and result in substantial savings for buyers in much of inner London.

Cash-starved and neglected London boroughs are set to gain most from the stamp duty abolition due to high property prices in the capital. It might be surprising, but other industrial areas of the UK are unlikely to see any benefit at all from it, since many homes are valued under £60,000 anyway and stamp duty often doesn't enter into the scheme of things.

Michael Osborne, director of East London estate agency Hamilton Fox, was quoted in This Is London as saying: 'Buyers for £250,000-plus properties will definitely be waiting until they hear the news on stamp duty. They would be crazy not to. The scheme will help bring first-time buyers into the market because they won't have to save up so much for a deposit.'

The government is still waiting on statistics from Northern Ireland before it can proceed with its much-awaited tax cut, but it will be at least June before they become available.

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