The cost of moving house is likely to go up significantly early next year, according to tax experts, who believe the chancellor will increase Stamp Duty rates again in the next Budget.

The government has already signalled that Stamp Duty has assumed an increasingly important role in generating revenue, and another increase could very neatly kill two birds with one stone.

On the one hand, it would help to choke off a growing boom in the housing market, which if allowed to run out of control could stoke up inflation. On the other, it is seen as a way of increasing tax revenues without becoming too unpopular.

Chancellor Gordon Brown: raised duty in the last Budget

According to the Inland Revenue, Stamp Duty currently raises �4.6bn a year for the government. The rates applying to property transfers were raised by 0.5% in the last Budget with hardly a squeak in response, while an equivalent increase in income tax rates would cause uproar.

The government also has the ready excuse of seeking to fulfil its obligation to harmonise taxes with the rest of the European Union, where the average equivalent rate of about 6% is well above the current top rate in the UK.

Staggered rates

Most people's experience of Stamp Duty is limited to when they buy a house or flat. As a proportion of the purchase price, the rates are:

• Up to �60,000 - none

• �60,000 to �249,999 - 1%

• �250,000 to �499,999 - 2.5%

• �500,000 or above - 3.5%

Given the fact that the vast majority of properties in the housing boom hot-spots in the south-east of England sell for more than �250,000, and that most of those in less thriving areas fall below that level, it is not difficult to see that Stamp Duty looks an obvious choice for the Chancellor come next March.

Bank of England: says it is keeping a wary eye on the property market

It is all the more attractive to a government desperate not to be forced to use the very blunt instrument of increasing interest rates to choke off the housing resurgence, should it become necessary.

The Treasury and the Inland Revenue are, of course, refusing to comment ahead of the Budget, and there is no question that any confirmation now of an imminent rise would exacerbate the housing boom by prompting a rush to beat the deadline.

But tax experts are confident that the writing is on the wall. John Whiting, Tax Adviser at accountants PricewaterhouseCoopers says Stamp Duty is a soft target: "It raises a lot of money for the government and is a very attractive option."

But he said there was a downside too: "If the rates go too high they can cramp the housing market, causing labour mobility problems.

"Also, there is a serious knock-on effect on business."

Stamp Duty on property applies to sales where ownership cannot be transferred by delivery to the buyer. So not only houses but a whole range of business assets are affected, such as fixed plant and machinery, commercial properties, goodwill, patents and copyrights.

This means that any increase significantly adds to the financial burdens on businesses, especially in the hard-pressed manufacturing sector.

"Gross avoidance"

Andrew Tailby-Faulkes, Tax Partner with accountants Smith & Williamson, says the increase in the last Budget has already led to a brand new industry springing up to help businesses get round paying the duty.

He says: "Few commercial properties change hands for less than �500,000 so the top rate is levied. This is now resulting in gross avoidance."

The implications have not escaped the notice of the tax authorities. John Whiting says: "The Inland Revenue is concerned that avoidance is getting a bit rampant and perhaps should be stopped."

Stamp Duty: unavoidable cost of moving house

But on the other hand, the government might take the view, at least in the short term, that an increase of Stamp Duty is all the more effective if it cannot be legally avoided in the housing market but can in the business sector, where it could otherwise be very damaging.

Then there is also the issue of the Stamp Duty levied on UK share transactions, currently 0.5%.

With the rapid growth of international share dealing online - which is free from the UK duty - the government is being urged to abolish the tax before the London market begins to lose business to cheaper competitors.

Victorian legislation

As a consequence of all these factors, the Chartered Institute of Taxation is calling for a thorough review of Stamp Duty, which is still governed by an Act of Parliament passed in 1891.

It is also calling for differential rates for business and non-business transactions so that the government can achieve its aims without placing too great a burden on companies.

In the meantime, the logical conclusion is that if you are thinking of buying a house or flat, it would be wise to consider doing so sooner rather than later.