The Government is being urged to quadruple the threshold at which stamp duty is introduced to £500,000.
Currently, stamp duty of 1% applies when a property is valued over £125,000. Properties valued over £250,000 incur a 3% charge, while those valued at £500,000 are charged 4%.
(Find out more in our express guide to stamp duty.)
Stamp duty has become a more pressing issue in recent months as cheaper mortgages and the Help to Buy scheme have driven property prices upwards.
Thousands of smaller homes for first-time buyers have now become eligible for the 1% charge, which starts at £1,250, while many more modest homes have also been driven up into the 3% category – worth a minimum of £7,500.
And with average house prices now approaching a quarter of a million (depending on which index is used), the average burden of stamp duty could soon be moving firmly into the 3% bracket.
But the Free Enterprise Group, supported by influential MPs including Treasury Committee chairman Andrew Tyrie, wants to abolish the tax for properties valued below £500,000.
The Group argues that withdrawing the tax on lower value properties would prove more helpful to first-time buyers than any of its incentive schemes.
Government Intervention
The Help to Buy scheme has encouraged lenders to support buyers with just a 5% deposit by offering a guarantee worth up to 15% of the mortgage.
While the scheme has been popular since its launch, it has also inspired competition in the market for higher loan-to-value mortgages.
Some of the best deals have been providers by local lenders, while the Nationwide – Britain's biggest mutual – has said that it is thriving without Help to Buy.
Other proposals by the Enterprise Group include axing National Insurance contributions for employers who take on unemployed workers under the age of 25. This would coincide with a three-year freeze in business rates, which would offer small businesses some stability.
However, more controversial proposals include lowering the rate of VAT to 15% and applying it to essential categories such as food and children's clothing, which are currently exempt from the tax.
Following calls to protect savers, the clamour over stamp duty and VAT will give the Chancellor plenty to think about as he prepares to deliver the Autumn Statement early next month.
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