Government to extend cut in house tax

LONDON (Reuters) - Prime Minister Gordon Brown will extend an exemption on an unpopular tax on home purchases in next week's budget in a bid to boost the flagging housing market, the Daily Telegraph reported in its Saturday edition.

Last September Brown's government said properties worth less than 175,000 pounds would be exempt from the tax, known as stamp duty, raising the threshold from 125,000 pounds.

The measure was due to last for a year but the Telegraph reported the new rate would be continued in an attempt to aid a housing recovery.

The one-year scheme was expected to take half of all home deals out of the tax net and cost the government an extra 600 million pounds.

A further extension would cost the Treasury an extra 100 million pounds, the paper said.

The move comes after figures from the Royal Institution of Chartered Surveyors earlier this week reported that house prices in England and Wales had continued to fall in March.

However, the survey said the pace of decline was the slowest in a year and sales volumes had picked up from record low levels, suggesting there were signs of stronger housing activity if not a recovery."

Figures from mortgage lenders suggest house prices have shed a fifth from their peak levels in 2007, plunging millions of Britons into negative equity.

Chancellor Alistair Darling's ability to provide any stimulus in Wednesday's budget to boost the economy has been limited because of a deterioration in the state of public finances.