The Debate: Should we abolish stamp duty for primary homes?
Kemi Badenoch’s promise to abolish stamp duty was met with cheers by the Conservatives, but is it a good idea? We put two property experts head to head in this week’s Debate
YES: Stamp duty incentivises people to stay in unsuitable homes, reducing labour mobility
Stamp Duty Land Tax (SDLT) is restricting mobility in the UK housing market. From first-time buyers to young families and downsizing pensioners, many are effectively trapped in their homes because SDLT costs can often exceed a year’s income, with consequences that extend far beyond individual households.
The housing market is a crucial enabler of labour mobility. When people can move freely, they take on new jobs, start families and grow businesses. SDLT actively disincentivises this. A 2017 study by the London School of Economics estimated that for every one per cent increase in SDLT, there is a 17-20 per cent decrease in the probability of a household moving. In effect, SDLT penalises dynamism.
SDLT also incentivises people to stay in unsuitable homes – families remain in homes that are too small, while older individuals stay in properties that are too large, simply to avoid paying the tax. This is a gross misallocation of housing stock in a country already facing a chronic shortage. If people could move more freely into properties that suit their current needs, the pressure to build more new homes would be reduced organically.
Whilst revenue from property taxes is important for our economy, SDLT is an inefficient way of raising it. Revenue that SDLT generates could be replaced by a reformed and fairer council tax, as the current system – based on property values from 1991 – is regressive and outdated.
In its current form, SDLT works against consumption, employment, construction and economic growth – and, most importantly, puts people’s lives on hold. Abolishing SDLT is an economic and social necessity, giving people the freedom to live, work and plan for their futures.
Matthew Robertson is co-founder and CFO of property developer Valouran
NO: Abolishing the tax gives a boost to those who need it least: older, wealthier homeowners
When Kemi Badenoch announced that the Conservatives would abolish stamp duty to “help achieve the dream of homeownership for millions”, the reaction was overwhelmingly positive. But while it’s an easy headline grabber, scrapping stamp duty outright is not the silver bullet it might seem to be.
I’m not blind to the flaws of stamp duty as it works currently – it distorts the market and puts unnecessary strain on transactions. Reform is needed. But abolishing it altogether risks funnelling yet another financial boost to those who need it least: older, wealthier homeowners. This group has already enjoyed decades of house price growth, generous pensions and the untaxed windfalls of equity. With nearly three-quarters of property wealth sitting in the hands of the over-55s, it feels perverse to channel further tax relief their way while younger generations remain locked out of homeownership.
If the government truly wants to support those struggling to buy, it should focus resources on first-time buyers. Raising the stamp duty threshold for this group would be a far more effective and equitable reform than scrapping the tax for everyone. At present, the threshold sits at £300,000. For many first time buyers, particularly in urban areas, that still means bills of £6,000 or more on top of punishing deposits and stringent mortgage requirements.
Extending the threshold would give buyers certainty, reflect the reality of today’s prices, and inject much-needed dynamism into the market. That’s how you help people achieve the dream of homeownership, not by offering another round of tax breaks to those who already have the keys.
Richard Dana is founder and CEO of mortgage platform Tembo
THE VERDICT
Kemi Badenoch was in need of a rabbit from the hat at the end of a miserable party conference, and pledging to abolish stamp duty on the purchase of main homes proved a showstopper. Indeed, so popular has the proposal proven, and so widely has SLDT been chided as a “bad tax”, it makes one wonder if Rachel Reeves might take the idea for herself. The Chancellor, after all, is thought to be considering a range of tax reform options ahead of the Autumn Budget.
But of course, that pesky black hole whirls and whirls, and cutting stamp duty comes with political peril: around a third of SLDT revenues are raised from properties worth more than £1m. As Mr Dana argues, boosting wealthy homeowners while younger Brits remain locked out of homeownership is not the best look. But let’s look beyond PR: gumming up the housing market at the top helps nobody at the bottom, as anyone in a housing chain knows. Abolishing stamp duty for primary homes would be a much-needed shot in the arm for the housing market.