Stamp duty has been axed for a year on properties costing less than £175,000 in an effort to kick start the ailing housing market. But what does that mean to housebuyers?

Previously, the tax had to be paid on all purchases over £125,000.

The Stamp Duty changes mean that anyone who is in a position to buy a home worth between £125,000 (the old starting point for Stamp Duty) and £175,000 (the new starting point) will be happy.

The Government’s move will save them £1,750 each and cost it £600 million in foregone tax. Perhaps the most interesting opportunity in the next year will be for buyers with an eye on a home worth just over £175,000.

They may be tempted to try to cajole their vendors into lowering the price so the sale goes through – tax free for the buyer, of course. But saving the odd couple of thousand pounds is not fundamental to the working of the property market at the moment.

According to estimates from the Council of Mortgage Lenders (CML) there were just over 289,000 mortgages granted in the first half of this year. Of those 50,000 would have benefited if the new tax regime had applied and the CML reckons 22,500 of them would have been first-time buyers as well.

So the figures are noticeable without being huge.

Will they have much effect on the market as a whole?

The much bigger problem is that banks and building societies have been forced to ration drastically their mortgage funds by raising the deposit required to buy a home. Many people who, a year ago, thought they might be certain to be granted a mortgage have had a big surprise.

They are now routinely told they have to raise a deposit of 10 per cent, 15 per cent or even 20 per cent, instead of the previous standard five per cent deposit. Thus the housing market has been plunged headlong into its biggest and quickest slowdown since the Second World War.

The Government says it thinks that about half of all residential property sales will now be exempt from Stamp Duty.

That looks about right.

According to the latest data from the Land Registry, nearly half of all sales in England and Wales during May were worth between £100,000 and £200,000. So the majority of these will now not be taxed for the next 12 months.

This latest change, targeted firmly at average-priced homes, is not a great tax "give-away". Until recently Stamp Duty on house sales had been a lucrative money-spinner for the Government, thanks to booming prices and buoyant sales.

But most of that – just over £5bn – came from the most expensive properties worth more than £250,000, on which tax is levied at three per cent, or four per cent if they were worth more than £500,000.

Meanwhile overall sales have slumped by about 50 per cent in the past year and are likely to fall even further, if the 71 per cent fall in mortgage approvals is anything to go by. So the Government’s tax take from Stamp Duty on home sales was always going to shrink anyway.