Londoners to pay billions more in death taxes and stamp duty

 
20 March 2014
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Londoners are likely to bear the brunt of the bill as the Treasury rakes in a staggering £37 billion more in stamp duty and inheritance tax over the next five years, it emerged today.

Official forecasts predict that the Chancellor will gain more than £30 billion extra in stamp duty nationwide from 2014/15 to 2018/19 as house prices rise. The independent Office for Budget Responsibility also highlights that as property values increase and share prices and saving continue to recover, more and more people are being dragged into paying inheritance tax.

The Treasury is set to gain an extra £6.8 billion from this over five years, with annual receipts rising by 70 per cent, it predicts.

The OBR forecasts that nearly one in ten estates will be liable for inheritance tax within five years compared with around five per cent now. In addition, increasing the threshold for paying the 40p rate of income tax at just one per cent over the next two years is set to bring in around £4.3 billion.

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But individuals dragged into paying the higher rate will still benefit from the starting threshold for paying income tax rising to £10,500 for 25 million workers.

Ministers insist that all workers, apart from the very wealthy, will be better off. But experts say overall the stamp duty, inheritance tax and 40p rate change are likely to hit London disproportionately hard given the capital’s wealth.

London accounted for 41 per cent of total stamp duty revenue last year but as prices continue to soar in the capital that is likely to have risen to close to 50 per cent.

With the Treasury predicting takings of just over £70 billion over the next five years, this suggests London home buyers will have to fork out as much as £35 billion. By 2018/2019 London home buyers could be contributing almost as much tax each year as all the smokers in the country, if the Treasury projections are correct.

Richard Blakeway, deputy mayor for housing, land and property, said: “These projections highlight once again that stamp duty is increasingly a London tax. As we face our toughest housing challenge after decades of under supply, devolving the vast sums raised through London’s property taxes would provide the fair, continuous funding we need to help provide hardworking Londoners with the homes and choices they deserve.”

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Kevin Hollinrake, managing director of estate agency group Hunters Property, said: “Stamp duty creates huge distortions in the market, particularly at the £250,000 mark, where buyers are taxed three per cent.

“£250,000 doesn’t go very far in certain parts of London, particularly when you have to pay £7,500 in tax just to buy the property.”

But Mr Osborne defended the levies as necessary to help balance Britain’s books after the “deepest recession in modern history”.

He said he would have “loved” to cut stamp duty, but added: “You just have to make choices about what your priorities are in a Budget and I thought the real priority when it came to housing was helping people to buy homes with the Help to Buy scheme.”

He added: “My job has been to fix the economy, create jobs, that creates incomes for people, and I know it is incredibly difficult, but the answer for this country is to work through this plan so the economy grows, and that is the only way to improve the living standards of people.”

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