Stark regional stamp duty divide emerges

Based on data from the HMRC, the research has shown that 10 of these 25 Local Authorities (LAs) pay more than £50m in residential stamp duty - nine of which are in London.

Kensington & Chelsea (£235m) generated the most residential stamp duty of any local authority in the UK in 2006/07, followed by Westminster (£193m) and Wandsworth (£122m).

Edinburgh, Leeds, Bristol and Birmingham are the only areas outside the South East amongst the 25 LAs that pay the most stamp duty. Limavady in Northern Ireland saw the largest percentage increase – 289 per cent - in residential stamp duty tax in 2006/07.

Twenty-four LAs experienced at least a doubling in the amount of residential stamp duty raised in their local area between 2005/06 and 2006/07. Twenty-two of these areas are in Northern Ireland, reflecting the substantial rise in house prices in Northern Ireland between the two years.

Isles of Scilly (270 per cent) and Ashfield in Nottinghamshire (121 per cent) were the only areas outside Northern Ireland to record a more than doubling in stamp duty revenues last year.

Kensington & Chelsea sees £90m rise in stamp duty bill in 2006/07. In monetary terms, the largest increase in residential stamp duty tax take was in Kensington and Chelsea with a £90m rise to £235m. Twenty-one LAs saw a rise of at least £10m in 2006/07, including Edinburgh (£14m), Brighton and Hove (£11m) and Bristol (£10m).

Regionally, Northern Ireland and the South West saw the biggest rises in residential stamp duty in 2006/07. Residential stamp duty revenue more than doubled in two regions between 2005/06 and 2006/07: Northern Ireland, up 126 per cent (£70bn) to £125m and the South West, up 121 per cent (£549m) to £1.0bn.

South of England generates most stamp duty revenue. The south of England contributed 73 per cent (£4.7bn) of all residential stamp duty revenues in 2006/07. Homebuyers in London paid the most - £1.7bn – accounting for 27 per cent of the UK total. Two other regions generated stamp duty revenue of at least £1bn: the South East (£1.4bn) and the South West (£1.0bn).

Martin Ellis, Halifax chief economist, commented: "There were some very steep increases in residential stamp duty revenue at a local level in the last financial year. More than one in seven local authorities saw at least a fifty percent increase in the amount paid by homebuyers in their area. A sharp rise in the number of property sales above the 3 per cent stamp duty threshold of £250,000 has been a key factor behind this dramatic increase."

KEY FACTS

• £6.4bn raised from residential stamp duty in 2006/07

Total stamp duty revenue from residential property sales in the UK rose by 40% (£1.8bn) in 2006/07 to a record £6.4bn. Over the past five years, annual residential stamp duty revenue has more than doubled with a 140% rise from £2.7bn in 2001/02 to £6.4bn in 2006/07.

• Higher stamp duty bands generate nearly 80 per cent of total residential stamp duty revenue

Residential stamp duty revenue raised at the higher stamp duty bands (3 per cent on sales between £250,000 and £500,000 and 4 per cent above £500,000) accounted for 79 per cent of all residential stamp duty revenue in 2006/07, at £5.1bn. Five years ago in 2001/02, the higher stamp duty bands contributed 61 per cent of total residential stamp duty revenue.

• Tripling in revenues from higher stamp duty bands in past five years

Stamp duty revenue raised from sales of properties valued at more than £250,000 rose by 208 per cent in the past five years from £1.6bn in 2001/02 to £5.1bn in 2006/07. More than nine-tenths (92 per cent) of the rise in the total annual residential stamp duty take over the five years has been due to an increase in the amount raised at the higher stamp duty bands.

• Higher stamp duty bands unchanged since 1997 despite 191 per cent increase in house prices

The higher stamp duty thresholds - £250,000 and £500,000 – have been unchanged since their introduction in 1997 despite a 191 per cent increase in the average house price over the period. The 1 per cent stamp duty threshold was increased from £60,000 to £120,000 in March 2005 and then rose by a further £5,000 in March 2006. However, even these increases have not kept up with the pace of house price inflation. House prices have increased by 222 per cent since March 1993 (when the 1 per cent threshold was raised to £60,000) compared with a 108 per cent rise in the stamp duty threshold.

• Higher stamp duty thresholds need to be raised significantly

If the higher stamp duty thresholds were increased in line with house price inflation since July 1997 - when the £250,000 and £500,000 stamp duty thresholds were introduced - the £250,000 threshold would now stand at £729,000 and the £500,000 would be £1,458,000. If the lowest stamp duty threshold had been increased in line with house price inflation since March 1993, it would now stand at £193,000. This would be £68,000 above its current level of £125,000.

• 25 per cent of UK properties are valued above £250,000

Halifax estimates that 25 per cent of properties in the UK, 5.4 million, are now valued above the £250,000 stamp duty threshold; and 900,000 (4 per cent) are valued above the £500,000 threshold. London and the South East account for 60 per cent of homes valued above £250,000 and 72 per cent of homes valued above the £500,000 threshold.