Halifax and A&L join call for tax overhaul by Brown

Click to follow

Two leading banks added their names yesterday to an increasingly vocal campaign for reform of stamp duty and inheritance tax.

Halifax and Alliance & Leicester accused Gordon Brown, who is this weekend putting the final touches to Wednesday's Budget, of raising billions of pounds of extra tax by ignoring soaring house prices.

Halifax said Treasury revenues from inheritance tax were on target to have doubled within nine years by April next year, with receipts set to reach £3.3bn during the 2005-06 tax year, compared with £1.6bn in 1996-97.

The bank also warned that millions more properties would be caught in the inheritance tax net unless the Chancellor raised the threshold at which the tax becomes payable - currently £263,000 - in line with house price inflation.

Treasury figures show that about 14 per cent of all property sales are valued above the threshold, compared with 3 per cent 10 years ago. If the threshold had been raised in line with house price inflation, it would now stand at £390,000.

Halifax predicted that the number of properties in the UK worth more than the threshold, currently 2.4 million, would reach 4 million by 2015 and 6 million by 2025.

Tim Crawford, Halifax's group economist, said: "Increasing numbers of people on modest incomes are now potentially liable to pay inheritance tax, something that used to apply mostly to the well-off."

Meanwhile, research published by Alliance & Leicester showed that fewer than 100,000 properties sold in England and Wales last year escaped stamp duty, which is payable on all transactions worth more than £60,000. It said just 8 per cent of house sales were stamp duty-free last year, compared with 60 per cent in 1995.

The £60,000 stamp duty threshold was last raised in 1993, since when house prices have risen by 151 per cent. The Treasury is expecting to raise £6.2bn from the tax this financial year, compared with £5bn in 2003-04.

Stephen Leonard, a director at A&L, said the tax now affected the majority of people taking their first steps on the property ladder. "The Chancellor has a great opportunity to alleviate the strain on first-time buyers by exempting them from stamp duty in this year's Budget," he said.

However, accountants warned that while Mr Brown's Budget is expected to be his final one before a general election, the Chancellor did not have many opportunities to be generous. John Whiting, a partner at PricewaterhouseCoopers said: "There isn't the financial room for a big giveaway Budget."