Time to revisit stamp duty

I'll begin with a confession - this is really a plug for my favourite telly programme masquerading as a business blog. So, first up, let's hear it for the best thing on TV by a country mile - Location, Location, Location hosted by Phil Spencer and Kirstie Allsopp. Brilliant presenters who are witty, authoritative and very good at what they do. They also combine a great personal chemistry with a passion for their work. And Mrs P gets to shout at the telly when the couples Phil and Kirstie are helping ignore their advice. What more can you want out of an hour of light entertainment?

But the latest series has adopted a more serious tone as Kirstie and Phil consider how to stop the bottom falling out of the housing market. Their solution - asking the government to take a serious look at stamp duty.

If you've bought a house, then there's a strong chance that you've come across stamp duty (or stamp duty land tax to give it its full name) and you may well think it's rather unfair. I certainly do.

In fact, I'd go further - in the 21st century, it's a real anachronism. That's because most taxes are based on something tangible - income, capital gain or value to think of three of the most obvious ones. Stamp duty isn't. No: it's the cost of getting a bit of paper that the government insists on before you can register your purchase at the Land Registry. The cost to you depends on the value of the house. Up to £125k, there's no charge. Then it's 1% of the purchase price up to £250k, 3% up to £500k and 4% for houses worth more than that. The average house price in England and Wales is £183,626. So, if you have bought an average house recently, there was nearly 2 grand extra on the bottom line in return for a bit of paper. It's perhaps no surprise that the total value to Alistair Darling is north of £7 billion.

Kirstie and Phil aren't advocating the abolition of the tax altogether, and it would be naïve to expect the government to find an extra £7 billion by magic from another source. Rather, their concern is to keep the property market buoyant - the volume of sales has fallen by roughly 30% between February 2007 and February 2008.

Their suggestion:

(i) First time buyers should not have to pay stamp duty when the value of the purchase property is under £250,000.

(ii) It should then be graduated for everyone else so that buyers generally pay 1% on the first £125,000 to £250,000. Above this threshold, the 3% would only be charged on the amount over £250,000 (rather than the full amount) and similarly the 4% only on the amount over £500,000.

Am I the only one who thinks that there's a lot of sense in this?