Labour will pay for £5,000 stamp-duty holiday for first time-buyers with landlord crackdown on tax avoidance

• Register of landlords to tackle tax dodging will help fund £225m giveaway
• Comes on top of promised rent-controls for tenants
• Labour would change planning law to give buyers from local area priority

First-time buyers would not have to pay stamp duty on houses worth up to £300,000 under a Labour government, the party’s leader Ed Miliband will announce today.

A three-year stamp duty holiday for first-time buyers would let them off the tax on homes up that value, potentially saving them £5,000.

‘There’s nothing more British than the dream of home ownership, starting out in a place of your own,’ Mr Miliband will say.

‘But for so many young people today that dream is fading with more people than ever renting when they want to buy, new properties being snapped up before local people get a look-in, young families wondering if this country will ever work for them.

‘It is simply too expensive for so many young people to buy a home today, saving up for the deposit, paying the fees and having enough left over for the stamp duty.’

Labour said its policy would cost £225million, which it says would be found through a series of tax-related measures.including tackling tax avoidance by landlords, which HMRC has calculated costs more than £550million each year.

A ‘national register of landlords’ will mean this can be cut by at least 20 per cent, generating £100million, Labour claims.

Labour would also increase tax paid by holding companies that buy UK property on behalf of investors and raise stamp duty on buyers from outside the EU.

The party would also cut tax relief that rogue landlords get for repairs and upkeep when their properties are not up to standard. Landlords who let furnished properties can claim tax relief even if they are not investing in their property.

The stamp duty cut would further alter the house-buying tax following Chancellor George Osborne’s overhaul of the system in December. That removed the old system whereby the tax became due at increasing rates on the whole value of a property according to a series of thresholds.

It was criticised for creating ‘cliff edges’ at which the tax bill for buyers would jump significantly. The Chancellor replaced it with a new system under which there is no stamp duty paid on the first £125,000 of a property purchase, 2 per cent between £125,000 and £250,000 and 5 per cent between £250,000 and £925,000.

Should the proposed Labour plan be enacted, it would mean first-time buyers of £300,000 properties will have seen their stamp-duty bill fall from £9,000 under the old system to zero.

Mr Miliband said the change will benefit nine in ten first-time buyers. The average price paid for a first home was £205,000 in February, according to the latest figures from the Office for National Statistics. This would trigger a £1,600 stamp duty charge under the current system.

The policy is a response to Conservative-led policies to help first-time buyers. Help-to-Buy equity loans give buyers a loan worth 20 per cent of the value of newly built homes, while the Help to Buy mortgage guarantee helps lenders supply low-deposit mortgages.

The policies have been criticised for mostly boosting demand for homes, pushing prices higher. The Labour stamp duty cut, although targeted specifically at first-time buyers, could face the same criticism.

It may also create a risk of a new cliff edge in the stamp duty system around properties worth £300,000.

However, Mark Hayward, managing director, National Association of Estate Agents, said: ‘This could be a real vote swinger for those looking to step on the housing ladder. Scrapping stamp duty for homes under the price of £300,000 would only mean good things for hopeful first time buyers.

‘For many, hidden costs such as stamp duty can be the difference between being able to afford a home, and not being able to afford one. Our recent research showed that just under a third of house sales were made to first time buyers, and hopefully we’ll see this significantly increase over the next three years.’

However, other argued rent controls will harm the supply of rental properties.

Jeremy Blackburn, head of UK policy at the Royal Institue of Chartred Surveyors, said: ‘Capping rent inflation through three-year fixed tenancies is likely to impact investment into the quality of homes already being rented privately and could force smaller landlords to exit the market – thus limiting supply at a time when the UK faces a chronic shortage of homes across all tenures.’

As well as the stamp-duty holiday, Mr Miliband will propose higher taxes on foreign buyers, while up to half of new homes will be earmarked for local residents trying to get a foot on the property ladder.

Planning law would be changed to give first-time buyers who have lived in a local authority area for more than three years ‘first call’ on up to half of homes built locally.

Labour aides say they would have a two-month window in which to buy a home before it was made more generally available in a reform designed to overcome local opposition to housing developments.

Speaking in Stockton, Co Durham, Mr Miliband will warn of a housing crisis in which a severe lack of homes being built has priced millions out of the property market and left many who want to buy living in private rented accommodation.

The rate of home ownership has slipped to its lowest for 30 years, and buy-to-let landlords and foreign investors are snapping up properties before others get a chance.

Labour claims it will oversee the construction of a million homes by 2020 and introduce controversial ‘use or lose it’ powers ensuring developers build on land rather than hoarding it. Local authorities will be able to levy council tax on sites that remain undeveloped to try to force developers’ hands.