Halifax to lobby for property tax reform
Halifax will lobby for changes in property taxation, especially Inheritance Tax and Stamp Duty, in the run up to the next General Election. Halifax will lobby all three main political parties, none of which has yet formally committed to a significant reform of the UKs property tax regime.
The need for reform is pressing. Research from the OECD shows that UK property taxes as a percentage of Gross Domestic Product (GDP) are the highest for any major developed country. According to the OECD, UK property taxes have risen from 3.7% of GDP in 1995 to 4.3% in 2002, the most current data available. In contrast, the average for Euro-zone countries is just 1.9%. The UK is one of only four OECD countries where property taxes make up more than 10% of Government revenues, the Euro-zone average is 4.9%. In the UK, property taxes as a percentage of total Government revenue has increased from 10.5% in 1995 to 12.0% in 2002. Inheritance Tax The facts: - The inheritance tax threshold has increased 75 per cent from £150,000 in 1992/93 to £263,000 in 2004/05. During the same period house prices increased by 139 per cent. If the inheritance tax threshold had kept pace with house price inflation over this period, Halifax estimates it would now stand at £359,000.
- The number of properties in the UK valued at more than the Inheritance Tax (IHT) currently stands at an estimated 2.4 million. Halifax estimates the number of properties now worth more than the Inheritance Tax threshold is almost five times greater than in 1997.
- The revenue raised by the government through IHT has risen by £1bn since 1995/96 from £1.5 billion per year to £2.5 billion in 2003/04.
- Estates valued at under £500,000 accounted for 69% of all estates paying IHT and for 23% of all of the IHT raised. According to Inland Revenue figures, approximately 40% of IHT taxpayers accounting for half of all IHT revenues reside in London and the South East.
Stamp Duty The facts: - Halifax estimates that the stamp duty threshold (currently £60,000) would currently be £146,750 if it had been increased in line with the rise in house prices since March 1993 - the last time that the threshold was increased. In 1993 almost two-thirds of dwellings sales were beneath the stamp duty threshold compared with around a quarter now.
- The Government currently takes around £4 billion each year from residential stamp duty.
- According to Halifax figures, the average first-time buyer (FTB) now pays more than £1,000 in stamp duty, equivalent to around 6% of their deposit or around two weeks of their annual income.
- In 1993, the typical FTB paid no stamp duty with London the only region where the average FTB paid the tax. In 2003 the average FTB in every region of the UK paid stamp duty (Source: Halifax).
Commenting about the need for reform of the property tax system, Shane O'Riordain, General Manager Government Relations, commented, "Change is long overdue. Successive Governments, irrespective of their political colouring, have not played fair with homeowners. This policy needs to change now." "Halifax believes that, at the very minimum, property tax thresholds need to be automatically aligned with house price inflation. The fiscal drag game that successive Governments have played is neither realistic nor equitable. Halifax will lobby for a large dose of realism to be injected into the property tax regime as soon as possible." Financial News Feeds provided by OneCompare.com
Date published: 11/29/2004 10:10:07 AM
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