Research from the Halifax, based on official figures, shows that tax revenue raised from both stamp duty on residential property and inheritance tax attributable to housing wealth is estimated to have risen almost five-fold from £735 million in 1992/93 to £3,638 million in 2001/02.
This dramatic increase has been driven by the failure of successive governments to raise tax thresholds in line with house price inflation.
Halifax also calculates that the stamp duty threshold (currently £60,000) would be raised to £118,500 if it were increased in line with the rise in house prices since March 1993 - the last time that the threshold was increased. The inheritance tax threshold would be raised to £296,300 - some £46,300 higher than its current level (£250,000).
Martin Ellis, chief economist, says: “It is clear from this research that more and more homeowners are potentially facing a rise in their tax liabilities as the government has declined to index property related thresholds in line with house prices.”
The main findings of the research are:
* Total revenues to the Government from residential stamp duty have increased almost ten-fold since 1992/93, from £280 million to £2,760 million in 2001/02. The rapid rise in house prices in 2002 indicates that the revenue raised in the current fiscal year will surpass £3 billion.
* The average UK first-time buyer in 2002 Quarter 3 paid £97,207 to buy their home compared to £45,249 in 1993. Based on the current stamp duty regime, the typical first-time buyer now has to pay £972. In 1993 the typical first-time buyer paid no stamp duty because the average price was well below the £60,000 threshold.
* In 2001, two-thirds (66%) of all buyers were liable for stamp duty compared with just over one-third (36%) in 1993.
* 8% of purchasers were liable for the higher rates of stamp duty applicable on properties bought for over £250,000 in 2001. In 1993 only 1% of purchases fell within this price bracket.
* The average first-time buyer in ten of the 12 UK regions now pays stamp duty (the North East of England and Scotland are the only exceptions). In 1993 only the average first-time buyer in London paid stamp duty.
* Receipts from inheritance tax totalled £2.35 billion in 2001/02. In 1999/2000 (the most recent year for which data is available), the value of residential property represented 37% of the total assets in the estates with net values above the inheritance tax threshold. On the basis that this proportion applied in 2001/02, the level of inheritance tax attributable to the value of housing wealth is estimated at £878 million. This compares with an estimated £455 million in 1992/93 - a 93% rise.
* More than 1.5 million homeowners in the UK could now face paying inheritance tax because their property is worth more than the £250,000 threshold.
* The 16% increase in the Inheritance Tax threshold during the last five years has fallen far short of the 77% growth in house prices during the same period. This has resulted in a more than three-fold increase in the number of properties that are now worth more than the inheritance threshold.
* In 1997, around 500,000 households fell into the Inheritance Tax bracket. (The latest Inland Revenue figures show that 8% of residential property transactions were over £250,000 in 2001. In 1997, 3% of properties are estimated to have been worth more than the existing threshold of £215,000.)
Phil Jenks, head of mortgages, says: “Housing activity is an important part of the UK economy, and it is right that a government should take its fair share of tax revenue from it. Housing, however, is most people's biggest asset and it is surely right too that tax thresholds are automatically linked to house price inflation to prevent more and more households paying inheritance tax and stamp duty.”