Stamp duty up tenfold under Labour as London buyers pay record £1.7bn

A record £1.725 billion was raked in by the Treasury from London house moves last year, according to latest statistics published by HM Revenue & Customs.

This was almost a third more than the £1.305 billion in 2005/06 and compares with £165 million a decade ago.

The new figures were quietly published after shadow chancellor George Osborne pledged to abolish stamp duty for first-time buyers on homes costing less than £250,000.

At present, stamp duty kicks in at one per cent at £125,000, rising to three per cent at £250,000 and four per cent at £500,000. The levels were set in 1997, since when London house prices have trebled.

John Whiting, tax partner at PricewaterhouseCoopers, said stamp duty was a "turbo-powered" tax for the Exchequer because the rise in property prices means tens of thousands more buyers are now caught in the top bands.

It is also cheap to collect as it is usually sent in automatically by buyers' solicitors, Mr Whiting said. "HMRC's role is just to receive it, see that the amount is credible and bank the cheque," he added.

Combined with stamp duty from the South-East, Chancellor Alistair Darling is now collecting more than £3 billion a year from the region, almost half the national total. Stamp duty brings in more for the Government than wine and beer duties combined.

First-time buyers paying a typical £280,000 for a London home have to pay £8,400 in tax. Martin Ellis, chief economist at the Halifax, said: "That is a whacking bill, a huge extra amount for first time buyers to find."

Even doubling the threshold to £250,000 will bring only limited relief in London. An Evening Standard survey shows that £250,000 will buy little more that a modest two-bedroom flat or terrace house - even in London's outer suburbs.

In central London there is no more than a handful of small studios for sale at this price.

But the Conservative proposal was welcomed across the industry.

Mike Carter, of property search engine Zoomf, said: "In 1997 the average London flat cost only £87,088. At that time stamp duty would have been only £871. Now the total needed by young people in London to stand any chance of getting onto the property ladder, given stamp duty and a five per cent deposit, is £21,000, not taking into account legal fees, removal costs and buying furnishings and appliances.

"On our listing only four homes in central London are priced under the £125,000 stamp duty threshold - and one of them is a houseboat."

Estate agent Savills has sold 242 London homes for more than £1million so far this year and estimate the Chancellor's take of that was at least £27 million.

Richard Barber of WA Ellis said: "The biggest impact is in buyers in the £800,000 to £1.5 million bracket, who have to find around £60,000 in stamp duty and are very unhappy about that."