Scrap stamp duty campaign

The time is right to scrap stamp duty for those who are buying homes to live in.

Angela Kerr Director, Editor

It’s time to scrap stamp duty. In our 2013 Stamping on Aspiration report, (yes we know that’s over a decade ago…stay with us) we reported on the astonishing impact the effect stamp duty was having on the market and called for a series of reforms.

We have come a long way since then. Government has made some changes to make the system fairer for those wanting to buy a home, for instance by:

• ditching the stepped, slab pattern of stamp duty, so you only pay the higher rate above the threshold, rather than the entire property price
• exempting first-time buyers from paying stamp duty (on the first £425k for properties up to £625k as of September 2022) and
• treating those who are buying a home differently from those who are looking to invest or buy a second home – with a 3% flat surcharge and an extra 2% to pay for non-UK residents.
• raising the minimum threshold to pay stamp duty from £125k to £250k.

In the past, the government has also opted to hike up stamp duty on more expensive properties  – a 10-12% tax on homes over £925k.

Where are we now

Given the piecemeal approach to reform, it’s no surprise we still have a system that continues to be a major obstacle to the housing market functioning properly. It’s a tax on mobility.

It’s a tax that puts off families from moving up the property ladder, fleeces homeowners needing to make a sideways move and making it more expensive for older generations to downsize. It’s a tax that is applied every time a property is bought and sold. As a result people are choosing not to move. This inactivity limits the number of properties to choose from when buying, in an already squeezed housing market. And the knock on effect of all these lost home moves percolates through the whole economy – with everyone from property services like removals firms, to furniture sales, to tradespeople missing out.

We continue to support the 3% surcharge on buy-to-let and second homes, and the 2% surcharge for non UK residents.  Although we think this should be a flat rate on the whole purchase price regardless of the price of the property. But we do believe those buying a home to live in should be treated differently to those looking to make money out of property or buying a second home as an investment.

That’s why we are calling for stamp duty to be abolished.

Confused as to how much stamp duty you’ll pay? Use our calculator

Stamp Duty Calculator for England & NI, Scotland and Wales

1. Where is the property you are buying?

England & NI Scotland Wales Please select a location for your property

2. Enter your property price

£

Please enter a value for your property over £10,000

3. Are you a first time buyer?

Yes No Please let us know if you are a first time buyer

4. Are you a UK resident?

Yes No

5. Will the purchase of the property result in owning two or more properties?

Yes No

5. Is it an investment property?

Yes No

6. Is the property being purchased replacing your main residence?

Yes No

Calculate Stamp Duty

Results go here

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In the past, government has toiled with the idea of putting stamp duty on the seller and not the buyer, but this would be a major change that, if not implemented carefully and gradually, could clog up the market even more. And for those wishing to downsize, the stamp duty effect would be an even bigger barrier than before.

Time for a stamp duty overhaul

In 2022, government, as part of its mini-budget for growth, raised the threshold for paying stamp duty from £125,000 to £250,000 as well as rejigging the exemption for first time buyers so they don’t pay any stamp duty on properties on the first £500k but only for properties worth up to £625k. If a first time buyer decides to buy a property that is more than £625k then normal stamp duty rates apply.

These changes were overdue. Since the first time buyer exemption was first introduced 5 years previously house prices soared which caused more first time buyers to fall into the stamp duty trap. Our research found that a third more first-time buyers at the time were having to pay stamp duty than they were five years ago.

But fast forward to present day and we still see stamp duty is stifling the market.

And we aren’t the only ones calling for change and argue a reduction in stamp duty will be a big boost for the economy. Numerous studies and reports support reform or abolition of stamp duty. Most recently, the Institute for Fiscal Studies has said the Chancellor should cut stamp duty if he wants to unleash “growth-friendly tax cuts” in his 2024 Spring Budget.  While the Institute of Economic Affairs adds that a cut in stamp duty could cut inflation and expand housing supply. And there are many more voices out there calling for reform.

Time to be bold with stamp duty

The government should abolish stamp duty for those buying a home to live in. Currently it’s a tax on transactions and so results in fewer of them, dampening the housing market and means that people don’t move even when they would like to. It is inefficient and deserves to go.

By abolishing stamp duty the market would be allowed to find its natural equilibrium. People would be able to move when they want to and the number of transactions would increase. There would be more chance for people to move up the market and therefore it would be easier for first-time buyers to get into the market.

It will help those older people wanting to downsize and free up capital, but haven’t as they have to pay stamp duty on a new purchase.

Obviously, this would result in a massive decrease in tax revenue for the government but perhaps not as much as anticipated as more people would be moving, generating demand for home improvements and property services, including removals, estate agents, conveyancing solicitors, etc. Lost revenues could be recouped with a corresponding increase in other property taxes that are more efficient – for example the rejigging of council tax could be a good place to start.