SINCE the likelihood of Gordon Brown cutting income tax when he stands up to give his Budget speech on Wednesday is negligible, one of the key issues many of us will be listening out for will be stamp duty — and what, if anything, the Chancellor plans to do to cut this now onerous tax on the property owning classes.

For stamp duty, much like inheritance tax, is no longer an inconvenience to a small, wealthy minority. Years of rapid property price increases, the failure of tax thresholds to keep up with property prices and a series of tax rises have meant that stamp duty now affects the vast majority of people who wish to purchase a home.

In 1997, when Labour came to power, a little more than half of all property transactions in the UK were exempt from stamp duty because the properties concerned were worth less than the threshold of £60,000. Just eight years later, only 7 per cent of all transactions escape stamp duty, Grant Thornton, the accountancy firm, says. And some stamp duty charges have increased by as much as 3,000 per cent.

Grant Thornton gives the example of a detached house in Kensington & Chelsea, which is on the market for £3 million. Based on Land Registry figures, this property would have been worth £382,665 in 1997. Someone buying the property then would have had to pay stamp duty at 1 per cent of the property value, giving a stamp duty charge of £3,826. Today, the buyer would have to pay stamp duty at 4 per cent, giving a charge of £120,000.

The double whammy of property price rises and tax increases has created a number of problems that the Government is under increasing pressure to tackle. The first is that because the average house price in the UK is now more than £100,000, even first-time buyers have to pay stamp duty, which is one of the factors preventing younger buyers from getting on the housing ladder.

The second problem is that stamp duty is becoming an unreasonable burden even for those who already have a foot on the property ladder. Land Registry figures show that the average house price in the South East is now £298,000, which means that the stamp duty payable is almost £9,000.

A third problem is the “slab” stamp duty system under which the rate of tax payable is determined by the price of the property and is then applied to the whole price. This creates artificial distortions in the market. For example, someone buying a property for £249,000 pays £2,490 in stamp duty, while someone buying a property for £251,000 pays more than three times as much (£7,530) because the rate jumps from 1 per cent to 3 per cent at the £250,000 mark.

The question, then, is what is Mr Brown going to do about it? The answer, however, is probably as little as possible. Mohammed Amin, of PricewaterhouseCoopers, the accountant, says: “Stamp duty is a tax that Chancellors love. It is easy to collect and very difficult to avoid.”

However, Mr Amin believes that raising the threshold under which you pay no stamp duty — currently £60,000 — would be an attractive option.

KPMG, another accountant, has suggested that the Chancellor might consider doubling the threshold to £120,000, a measure which it says would cost the Treasury just £300 million, and so would be affordable.

Doubling the threshold would exempt about 300,000 transactions a year from stamp duty, many of which would be by first-time buyers. “Doubling the stamp duty threshold would be a dramatic gesture,” says Steven McGrady, of KPMG. However, he believes that this is as far as the Chancellor can go. “We do not believe he could raise the threshold to £150,000, as the Liberal Democrats and some banks and building societies have suggested, as this would cost £500 million.”

But raising the stamp duty threshold does not address the other problems with the tax. Kevin Griffin, of Ernst & Young, the accountant, says: “The Government should give serious thought to a more radical overhaul.” He believes that Mr Brown should consider abandoning the slab system in favour of a graduated tax regime, under which different rates would apply to different elements of the purchase price of a house. For example, the first £60,000 of the price would be tax-free, the next £190,000 would be taxed at 1 per cent, the next £250,000 at 3 per cent and anything above that at 4 per cent.

However, most commentators believe that such a radical move is highly unlikely. Mr McGrady says: “A conversion to a graded system would cost more than £2 billion, and the only way you would be able to fund that out of stamp duty would be to increase the top rates to 6 or 7 per cent. That would be extremely unpopular with businesses.”

Mr Amin adds: “My view is that he will try to do as little as possible while still being seen to do something.”