Bid to revive property market

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The change, which comes into effect on Wednesday, raises the threshold on which 1% stamp duty is paid from its current level of £125,000.

The move will save eligible home-buyers up to £1,750 when they purchase a property, and relates only to buildings entirely for residential use.

In a statement, the Treasury said: "The Chancellor of the Exchequer has announced that stamp duty land tax will not apply to purchases of residential property of £175,000 or less.

"This will provide an exemption from stamp duty land tax for land transactions consisting entirely of residential property where the chargeable consideration is not more than £175,000. This relief will apply to transactions with an effective date on or after 3rd September and before 3rd September 2009."

The Treasury estimates that the one-year stamp duty freeze will cost the Government £600 million - suggesting that it expects about half a million home-buyers to benefit from the change.

Around half of the 90,000 home purchases completed each month are on properties worth £175,000 or less, but deals below £125,000 are already exempt from stamp duty.

The average price of a home in the UK was just under £165,000 in August, according to the Nationwide Monthly House Price Index.

The plan for a stamp duty freeze first emerged last month but was met by official silence - leading to claims that the housing market had been paralysed by dithering between the Treasury and Downing Street.

The announcement came as Communities Secretary Hazel Blears unveiled a further package of measures to revive the housing market, including help for first-time home-buyers and people at risk of repossession.