House taxes rising
Following the Telegraph’s note that the average house price in the South East has exceeded the £325,000 inheritance tax threshold for the first time, which has remained static since April 2009, the Evening Standard ran an article that shows that Londoner’s have to pay £20,000 in stamp duty on the average price of a house (£500,000).
The average house price increased £15,000 in July to £514,000, up 19.1% over the year.
The stamp duty bombshell comes as a result of the ‘cliff-edge’ effect – once the threshold has been exceed, the new rate is applied to the whole amount.
So you can pay £499,000 for a house, and pay stamp duty at 3% – £14,970, but if you pay £501,000 for the house, your stamp duty is 4% – £20,040.
Despite rising clamour for change to these taxes, and the Conservative manifesto for their 2010 election campaign promising to increase the inheritance tax threshold to £1m, there seems to be very little incentive for the government, in these cash-strapped times, to get rid of a source of significant income.
Official forecasts predict that the total revenue from stamp duty receipts will be £77bn from 2014/15 to 2018/19, and that the money raised from inheritance tax will increase from £3.5bn per year to £5.8bn per year by the end of the decade.