The Chancellor of the Exchequer, Alistair Darling, yesterday announced that stamp duty land tax will not apply to purchases of residential property of £175,000 or less, effective from tomorrow.

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 3 September, and will run for a year.

The level at which the 1% purchase tax has to be paid is to be increased from £125,000. The move will save someone buying a £175,000 house £1,750.

The Government estimates that half of all property transactions will now be exempt from stamp duty. Previously, one in three transactions did not attract any tax when the threshold was £125,000.

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Responding to the announcement, a Halifax Bank of Scotland spokesperson said: "We welcome the Government's stamp duty initiative. This is a sensible measure and it will help the housing market."

A spokesperson for the Nationwide building society said: "Nationwide welcomes initiatives designed to support borrowers and the housing market. We look forward to reviewing these proposals in further detail and are committed to working with the government and the industry on measured responses to the current conditions."

The Council of Mortgage Lenders (CML) welcomed the measure. However, the CML also urged the government to focus on the mortgage funding markets as much as on consumer-facing initiatives.

CML director general Michael Coogan said: "Essentially this package is directed at the blockages in the housing market for some vulnerable consumers. This is welcome, but until more funding is available we are still some way from restoring long-term stability to the housing and mortgage markets.

"CML members have committed to a range of measures designed to ensure that borrowers who may find themselves in difficulty have good access to advice services that can help them, as well as to alert them in good time to changes in their payments to allow them time to budget or to contact their lender to discuss alternative payment options if necessary."

However, he added: "The stamp duty concession for properties under £175,000 is something of a curate's egg - good in parts. It will reduce transaction costs for some buyers, which is welcome. But we estimate that around half of all housing transactions will still be caught by stamp duty."

(GK/JM)