SNP backs plan to reform stamp duty in bid to 'defreeze' property market

Published on Saturday 4 October 2008 20:02

THE SNP is to back a major reform of stamp duty next week in a move which would cut taxes for thousands of middle-income home buyers.

The Nationalists say that stamp duty should be levied in bands in a similar way as income tax, so that the higher rates of the duty only apply to those homes above a certain price.

Currently, somebody buying a home valued at over 250,000 pays 3% stamp duty on the entire cost of that property. Stamp duty is levied at 1% for properties between 175,000 and 250,000.

Under the SNP's proposals, only the part of the price above 250,000 would be priced at 3%. So, for example, a house worth 300,000 would attract 5,500 stamp duty. Currently, a home buyer has to pay 9,000 in stamp duty for such a house.

The tax cut for such middle range homes would be paid for by increasing the stamp duty on those homes at the top of the range. Currently, the top stamp duty rate is 4% on homes worth more than 500,000. The SNP support a bigger tax take on homes above this price.

The SNP insist that such a change would help to 'de-freeze' the property market in the crucial mid-range. There is growing speculation that the UK Treasury may adopt the plan at the next budget in the spring.

The proposal will be put forward at the SNP conference by Alex Neil. The party is expected to back it at which point it will become policy. However, as stamp duty is a tax reserved to Westminster, the SNP is powerless to bring about a change in Scotland. Such a reform would have to be enacted by the UK Government.

Neil said: "This will be passed at conference. It is a much more sensible and fairer system and there isn't really any opposition to it.

"I expect we will see the UK Government do the same because the current system doesn't make sense."

Neil added: "This would have a far greater effect on stimulating the housing market than the current freeze because it would be a permanent change. By definition you are going to give benefits to people at the lower and middle end of the market."

Alistair Darling, the Chancellor, recently announced that home buyers purchasing properties worth less than 175,000 would pay no stamp duty at all for the next year.

However, figures last week showed that the property market has now all but ground to a halt, as buyers wait to see whether the value of homes will continue to fall.

A spokesman for the Treasury was unable to comment on the SNP's proposals.