Agents fight for stamp duty reform.

STAMP duty is an "anachronistic"tax on aspiration and should be reformed, property professionals said this week.

The National Association of Estate Agents and the Association of Residential Letting Agents said the way stamp duty was charged distorted the UK's property market.

The groups said 86% of estate agents thought the tax was unfair, while 81% thought reforming it would have a "very positive" impact on the property market.

In addition 91% of estate agents also thought the current stamp duty holiday on properties costing up to pounds 175,000 should be extended.

Chris Stonock, area manager at Halifax Estate Agency, said: "Of immediate concern is the proposal that the stamp duty threshold will return to pounds 125,000 from the beginning of next year. Lenders are demanding bigger deposits from first-time buyers so the Government should look to extend the current threshold of pounds 175,000."

Mr Stonock believes stamp duty should reflect the changes in average house prices.

"Stamp duty has never been linked to average house prices," he said. "The thresholds have stayed as they were, despite the fact that house prices have changed. Stamp duty should be reconfigured in relation to house prices and the thresholds should move with it.

"Stamp duty is a way of raising revenue, but it's important for the country that the housing market is working efficiently and people can move quickly and freely. The housing market is in the early stages of recovery and we don't want anything to hinder that."

The NAEA and ARLA have joined forces to call for the tax to be modernised. Calling themselves the 1808 Coalition, after the year in which stamp duty was introduced, they believe the tax is a "relic of another age".

At present, stamp duty is charged at 1% of the purchase price on properties costing between pounds 175,000 and pounds 250,000, although this will fall back to homes costing from pounds 125,000 from the beginning of next year.

People buying a property for between pounds 250,000 and pounds 500,000 have to pay 3% of the purchase price in stamp duty, while the tax is charged at 4% on homes costing more than pounds 500,000.

But commentators argue that the way the tax is charged distorts the property market, as people buying a home for pounds 251,000 have to pay stamp duty of pounds 7,530, while those buying one for only pounds 249,000 pay only pounds 2,490.

The NAEA also warned that with lenders demanding high deposits from borrowers, many first-time buyers were struggling to find the additional money they needed to pay stamp duty.

The thresholds at which the tax is charged have also failed to keep pace with house price rises, with increasing numbers of people caught by the tax or paying at a higher level.

Revenue from stamp duty on residential properties soared 10-fold between 1996/97 and 2007/08, rising from pounds 675m a year to pounds 6.68bn.

The tax also falls unequally on people buying properties in different parts of the country because of variations in house prices.

The coalition wants the Government to suspend the tax until the property market has recovered. It also wants it to reform it from the current "slab"system to a progressive one and for thresholds to rise in line with inflation each year.

However, James Abbott, of Smiths Gore's Corbridge office, was not optimistic that an overhaul would be considered.

"There's no doubt that stamp duty is an issue for purchasers," he said. "There have been calls for many years to reform stamp duty, especially at the lower end of the market. I can't imagine the Government being so benevolent in the current climate without shifting the tax to the upper end of the market. "

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