Stamp duty is a transaction tax imposed on property either in England or Northern Ireland. Given that housing is a large driver of inflation, its role in the economy cannot be understated. Westminster controls this tax, the revenue from which has had a yo-yo effect over the last several years. In 2023, stamp duty raised £15.4 billion, a significant jump from £11.6 billion in 2020. Talk of repealing this regressive tax has picked up steam. Experts are still looking at how this proposed change might reshift the housing landscape.
The current stamp duty structure is highly punitive to those purchasing. This is particularly problematic for those seeking to join the housing market in southern England. This region generates 60% of all stamp duty. Ending the tax would do little for renters and everyone would pay a higher price for land, largely benefitting current homeowners and future buyers in the south. First-time buyers now benefit from exemptions on homes worth up to £300,000. If stamp duty were abolished completely, they might enjoy even higher benefits.
In 2019, the government raked in a record-busting £11.9 billion in stamp duty. That total fell a bit to £11.6 billion in 2020. Revenues plummeted down to £8.7 billion by 2021. They had a stunning recovery to £14.1 billion in 2022 and rocketed up to an all-time high of £15.4 billion in 2023. Forecasts for 2024 show a rebound to £11.6 billion, showing just how variable and uncertain this revenue source can be.
Regional variations add another layer of complexity into the debate about scrapping stamp duty. First time buyers in the North East of England have a distinct advantage. That’s because a stunning 76% of listed properties are under stamp duty exemption! Yet in London, it’s the opposite. Currently, only 11% of homes are exempt from this punitive first-time buyer tax. This significant gap is a reminder of the struggle new entrants to the housing market often face—especially in desirable cities and metro areas.
The devolved administrations in Scotland and Wales do administer their own land and transaction taxes. This implementation makes them quite different from the stamp duty system in England and Northern Ireland. This new decentralisation might just shape the way policymakers think about the prospective reforms to stamp duty come to be.
The case for abolishing stamp duty is often framed in terms of improving housing affordability and making the market function more efficiently. Eliminating the tax completely would increase property sales.
Pervasive adoption for buyers
Buyers would have lower upfront costs, making it more attractive to buy. Such a change will increase demand the most, especially in the part of the country that most needs it—southern England, where the home prices have always been high.
Moreover, scrapping stamp duty would allow more first-time buyers to get a foot on the market’s ladder. At present, over 40% of homes listed for sale in England are out of reach for first-time buyers, who would still pay stamp duty on them. An abolition would significantly widen this pool, letting more people attain the wealth-building benefits of homeownership without the shackling weight of new taxes.
As some analysts warned, the actual ramifications of passing this bill could be harsh. They contend that removing stamp duty could provide home buyers real, immediate relief. This would pump up new property values since demand would dramatically increase. This situation would in the end be counterproductive to the stated goal of making generally affordable housing more affordable.