Removing stamp duty would be a massive game changer for the English housing market. This amendment would be incredibly impactful, especially in the south where the majority of the tax is levied. Recent noises from Kemi Badenoch suggest that a future Conservative government will be looking to implement exactly this policy change. Separately, this reinforces a sense of inequity in how taxes are paid based on geography, as today 60% of all stamp duty revenue comes from southern England.
In recent years, stamp duty has produced wild swings. In 2023, it flew past £15.4 billion — an impressive rise from just £11.6 billion in 2020. Taking away this punitive tax would completely change the market forces in play. It would particularly help out first-time buyers and people trying to downsize or relocate. Richard Donnell of Zoopla had something interesting to say on the current housing market’s woes. Countless others can’t save up enough deposits to get a place of their own.
It is particularly damaging in high house price cities such as London. Yet only 11% of properties in London are exempt for first-time buyers, compared to a very generous 76% enjoying exemptions in the North East of England. This disparity illustrates the real inequities that would result from moving these tax credits. First-time buyers already enjoy exemptions when buying properties up to £300,000 in England and Northern Ireland.
The great stamp duty debate continues to roil the policy waters. Scottish and Welsh local governments retaining their own land and transaction taxes complicate the picture and the discussion on reforming or abolishing stamp duty entirely.
In 2019, the government received £11.9 billion in stamp duty. The next few years were ups and downs: falling to £11.6 billion in 2020, £8.7 billion in 2021, rebounding to £14.1 billion in 2022, and hitting an all-time high of £15.4 billion in 2023. 2024 projections are back to £11.6 billion. This should raise critical questions about how such revenue will ever be preserved absent this tax.
Critics warn that it might sound good to abolish stamp duty, but it could do more harm than good. Savills’ Lucian Cook has raised the alarm on a ticking timebomb. If this change is allowed to be simply another tax giveaway, the result will be increased property prices rather than housing cost relief for buyers.
“If, and this is a big if, it is a simple tax giveaway, the likelihood is that the current stamp duty bill simply passes through into prices.” – Lucian Cook, head of residential research at Savills.
Cook stresses that any reform would almost certainly have disproportionate impacts on various areas of the country. The issues behind the differences in stamp duty exemptions for first-time buyers reflect even larger problems facing the housing industry as a whole.
“Given the way stamp duty works, this would be unevenly distributed across the country.” – Lucian Cook, head of residential research at Savills.
Sarah Coles is head of personal finance at Hargreaves Lansdown. She points out how these costs deter would-be movers. She explains that the stamp duty effects have seen countless homeowners push back their plans.
“Our research shows over 800,000 homeowners have shelved moving plans in the past two years, and stamp duty is a major barrier.” – Sarah Coles, head of personal finance at investment platform Hargreaves Lansdown.
Coles builds on this idea, explaining that even with reduced property values, downsizing can end up costing people a lot. If you sell a £750,000 house and buy a £300,000 one, you will pay £5,000 in stamp duty. This cost is insignificant compared to the additional costs associated with moving.
“Take someone downsizing, from a £750,000 property to a £300,000 one. In England and Northern Ireland, they’d pay £5,000 in stamp duty. It’s a fraction of what they’re likely to pay in estate agency fees…” – Sarah Coles, head of personal finance at investment platform Hargreaves Lansdown.
Defenders of abolishing stamp duty claim that this will improve home ownership and build societal justice along the way. Paula Higgins, chief executive of the Homeowners Alliance, contends that restrictive taxes like stamp duty hinder many prospective homeowners from entering the market.
“Homeownership is the foundation of a fairer and more secure society – but stamp duty has denied that opportunity to too many for too long.” – Paula Higgins, chief executive of the Homeowners Alliance.
