Reactions to the proposal to scrap stamp duty in England and Northern Ireland have set off an exciting debate. Everyone wants to know how this big change will impact the housing market. Today stamp duty is an important source of revenue for the national government in Westminster, bringing in £15.4 billion in 2023. The Conservatives have suggested eliminating this tax on main home purchases, arguing that it would benefit prospective homeowners, particularly first-time buyers.
Stamp duty is a crucial linchpin in the property purchasing process across England and Northern Ireland. In reality, 60% of all stamp duty is collected from the south. The principle benefits from eliminating this tax would be experienced almost entirely in the south. By comparison, Scotland and Wales control their own property and land transaction taxes via devolved administrations.
For first-time homebuyers in England, there are already exemptions for homes costing less than £300,000. Most importantly, all of this means that nearly 40% of homes for sale in England are now stamp duty free for first-time buyers. In the North East, a remarkable 76% of homes meet the criteria for the exemption. London is the exact opposite – only 11% of properties are eligible.
This disparity further amplifies the inequality in how these benefits would be distributed if stamp duty were to be abolished. Lucian Cook, head of residential research at Savills, emphasizes that “given the way stamp duty works, this would be unevenly distributed across the country.” He’s been clear that if the proposed changes merely become a tax giveaway, the stamp duty bill we have now will almost certainly get passed on to property prices. This threatens to have negative ripple effects on the housing market.
So, what are first time buyers being offered? According to Sarah Coles, head of personal finance at Hargreaves Lansdown, raising the bar even further. She notes that “for them, the enormous challenge is raising a deposit.” Removing stamp duty helps eliminate that sense of financial oppression. At the same time, it does nothing to address the bigger issue of affordability in the overall property market.
The argument about stamp duty has become slightly clouded by the broader debate around the cost of property transactions. Coles points out that in a scenario of downsizing, for example when moving from a £750,000 house to a £300,000 house, the £5,000 stamp duty cost is moot. He argues that other costs, like estate agency fees and removal costs, will be much greater.
Paula Higgins, chief executive of the Homeowners Alliance, advocates for the abolition of stamp duty, stating, “Homeownership is the foundation of a fairer and more secure society – but stamp duty has denied that opportunity to too many for too long.” Her testimony underscores today’s bipartisan recognition that our out-of-date housing policies need to change to better serve aspiring homeowners.
The amount of revenue that the state has collected from stamp duty over the last few years. In 2019 it was £11.9 billion. Having fallen to £8.7 billion in 2021, it then rebounded to £15.4 billion in 2023. After dipping to under £11 billion per year forecasts suggest a recovery to about £11.6 billion by 2024. This fluctuation highlights the need to fully comprehend the economic ramifications of any suggested adjustments to stamp duty legislation.
Supporters of abolishing stamp duty argue that it will ease the burden facing homebuyers. They claim that increasing transactionability will jumpstart the housing market. Richard Donnell from Zoopla notes that scrapping stamp duty would likely resonate positively with many buyers, particularly those entering the market for the first time.
Conversations around the future of stamp duty continue. Perhaps most tellingly of all, it’s evident that any proposed changes to legislation will have a large, palpable effect on specific regions in England and Northern Ireland. Stakeholders will be watching closely to see how these proposals take shape. They want to know what it will mean for existing homeowners as well as future homebuyers.