A COALITION of mortgage brokers, financial advisers and property experts is calling for stamp duty reform through the expert-powered news agency, Newspage, arguing the tax has become one of the biggest barriers to a functioning housing market.
Stamp Duty Land Tax (SDLT) is a tax paid when buying a property or land in England and Northern Ireland, often adding thousands of pounds to the cost of moving home.
Buyers pay nothing on the first £125,000 of a property’s value, or £300,000 for eligible first-time buyers buying a home worth up to £500,000, with tax charged at increasing rates on the value above those thresholds.
There is broad agreement that the current system discourages people from moving home and creates knock-on problems across the property ladder.
Industry figures say stamp duty is preventing first-time buyers from getting onto the housing ladder, trapping growing families in homes that are too small, and discouraging older homeowners from downsizing and freeing up larger family properties.
Many also argue that outdated thresholds have failed to keep pace with rising house prices, particularly in London and the South East, leaving more buyers paying higher rates than originally intended.
But experts are divided on the best solution with some favouring abolishing stamp duty on owner-occupied homes altogether and replacing the lost revenue with an annual property tax.
While others argue for more targeted reforms such as higher thresholds, exemptions for first-time buyers and downsizers, or allowing buyers to spread payments over several years.
Most agree that reform should improve housing mobility without simply inflating house prices or leaving a multi-billion-pound hole in the public finances.
A regressive tax
Rupert Collingwood, Founder at The London Broker, said stamp duty should first be abolished for primary residences.
He added: “Stamp duty is a regressive tax that has been abused by successive governments trying to control the property market whilst also attempting to fill the ever increasing black holes in public spending.
“When each and every government since Thatcher has trumpeted the cause of home ownership, it is ironic that those same governments should at the same time place in the way of home ownership a tax which has to be paid, in cash at the point of transaction, thus limiting the ability of the young, families and downsizers to move up or indeed down the ladder.
“Abolishing stamp duty for primary residences would be a smart first step, as why should the government tax the largest asset their citizens purchase with already taxed income? In addiction, the debate around Capital Gains Tax on primary residences, is in some ways nonsensical especially when you consider that whilst they may not be taxed on the sale of their previous house at 24% of their gain, on their new purchase they could pay over 9% on the whole (at £3million).”
Paul Denley, CEO at London-based Oakham Wealth Management, said the tax makes the housing market “inefficient”.
He added: “Stamp duty is an economic friction point that becomes harder to defend the closer you look at it. Taxing transactions discourages transactions: it is a tax on mobility itself, hitting many first time buyers, growing families, and downsizers alike.
“The result is an inefficient housing market where people remain in homes that no longer suit their needs simply because the cost of moving is too high. While total abolition is fantasy economics without a plan to replace around £12billion in revenue, pragmatic reform is entirely achievable. Thresholds should better reflect regional house prices, ending the disproportionate burden on London and the South East, alongside targeted exemptions for downsizers and first time buyers.
“With a mansion tax looming, there is also a legitimate question about how many times the same asset should be taxed. The goal should be a property tax system that raises the necessary revenue without clogging up the housing market.”
A tax on moving home
Jamie Elvin, Director at London-based Strive Mortgages, said people are choosing not to move home due to the tax.
He added: “Stamp duty has become a tax on moving home. It discourages growing families from upsizing, older homeowners from downsizing, and workers from relocating, simply because the upfront tax bill is so high. Every move that doesn’t happen creates a ripple effect, reducing housing supply and making it harder for first-time buyers to get onto the ladder.
“While abolishing it altogether may not be realistic given the revenue it raises, the current system needs reform. Thresholds should better reflect today’s property values and regional differences, with any relief focused on improving housing mobility rather than temporarily inflating house prices. The aim should be a tax system that supports a healthier, more fluid housing market – not one that penalises people for moving.”
Ross Lacey, Director & Independent Financial Adviser at Rayleigh-based Fairview Financial Management, suggested some tweaks for a starting point.
He added: “Abolish it altogether on owner-occupied residential property. Naturally any reduction in tax means the government will need to either reduce spending elsewhere or find another way to raise the money. Stamp duty acts as a massive barrier to keeping the property market moving.
“As a starting point, moving to a payment plan type arrangement rather than having to pay it upfront could be a way to test the impact on the volume of property transactions.”
Britain’s most self-defeating tax
Samuel Mather-Holgate, Managing Director & IFA at Swindon-based Mather and Murray Financial, said the tax feels like a penalty.
He added: “Stamp duty is one of Britain’s most self-defeating taxes. It punishes people for moving, traps older homeowners in properties too big for them, and clogs up the family homes market. It should be scrapped for owner-occupiers and replace the lost revenue with an annual property levy linked to value and size, with protections for the cash-poor but asset-rich.
“That would mean people pay fairly for the housing wealth they hold, not a huge penalty for doing the sensible thing and moving. If full abolition is politically too big a leap, start by scrapping stamp duty for downsizers and primary residences, while keeping tougher taxes on second homes and investment properties. The current system is a mobility tax, and Britain’s housing market needs movement.”
Rohit Kohli, Director at Romsey-based The Mortgage Stop, doesn’t expect the government to scrap the tax entirely.
He added: “Full abolition is the goal, but let’s be honest about the odds – no government is giving up that much revenue in one move. What’s actually achievable is fixing the first-time buyer threshold, frozen at £300,000 while house prices have moved on without it.
“My preferred fix is changing how first-time buyers pay stamp duty, not just whether they pay it. Let them spread it over five years instead of stumping up the full amount on completion day. On a £500,000 home with a £10,000 bill, that’s £166 a month instead of £10,000 in one go, with any balance recovered from the sale price if they move within five years. Same tax, fairer timing.”
Full abolition is the goal
Darryl Dhoffer, Founder at Bedford-based The Mortgage Geezer, said scrapping the tax may have unintended consequences.
He added: “Tinkering with stamp duty won’t fix UK housing, it just fuels price inflation. Abolishing it for owner-occupiers creates a £10bn budget black hole while sellers simply hike prices to absorb the savings. Scrapping it for first-time buyers will trigger localised bidding wars, pricing out the exact youth it claims to help.
“Cutting it for downsizers fails because wealthy empty nesters stay put due to nostalgia and a lack of retirement stock, not tax bills. Restricting the tax strictly to investors completely destroys rental supply, pushing rents to painful new highs. While indexing thresholds to inflation is sane reform to stop stealth taxes, it won’t build a single brick.
“Stamp duty is a terrible tax, but populist exemptions just line sellers’ pockets. We must replace it entirely with an annual property tax which should abolish stamp duty and council tax, or stop pretending to care.”
Photo by Will Porada on Unsplash.
