The current discussion around the reform of stamp duty in England and Northern Ireland dominates talk of housing market policy. It remains a priority for the most powerful stakeholders. Recent Conservative Party proposals to abolish stamp duty on primary homes received a great deal of focus. This subject was a key feature of the Tory Party conference’s high point. If adopted, this small policy shift would go a long way towards leveling the playing field for homebuyers. First-time buyers, who are exempt from this tax on the first £300,000 of a property, will be disproportionately impacted.
In England and Northern Ireland, homebuyers face a stamp duty liability of £5,000 on the purchase of dwellings that exceed the threshold. This fee represents a large additional cost to home ownership. That means millions of first-time buyers will be able to avoid paying this expensive fee. Indeed, exemption limits apply to 40% of homes currently listed for sale all over England. In areas such as the North East of England, this increases to 76%. These exemptions are intended to encourage homeownership for those entering the market for the first time. They raise new equity and accessibility concerns.
The danger of being too dependent on the housing market for stamp duty revenue has been laid bare in recent years. The government’s own figures confirm that stamp duty raised all of £15.4 billion in 2023. This reflects a robust rebound following the pandemic dip in collections. Unlike in years past, when collections could vary widely by year. They hit £14.1 billion in 2022, £8.7 billion in 2021, £11.6 billion in 2020, and £11.9 billion in 2019. What this variability highlights is that the fortunes of the housing market have a direct and drastic effect on government revenues.
Scotland and Wales have long had their own, separate systems of land and transaction taxes, controlled by their devolved governments. Whether or not you think changes to stamp duty are a good idea, any such change would only affect England and Northern Ireland. This variation has the potential to cause disproportionate impacts throughout the UK.
Specialists have outlined the potential impacts of scrapping stamp duty. Lucian Cook, head of residential research at Savills, remarked, “If, and this is a big if, it is a simple tax giveaway, the likelihood is that the current stamp duty bill simply passes through into prices.” This begs the question of whether any possible benefits to purchasers would be canceled out by higher property values.
Additionally, Cook observed that the consequences of such policy shifts would not be felt uniformly across the country. “Given the way stamp duty works, this would be unevenly distributed across the country,” he stated. This makes clear the complexities surrounding reforming tax systems that distort regional property markets in various ways.
Sarah Coles, head of personal finance at Hargreaves Lansdown, emphasized the challenges facing homebuyers. She was particularly intent on addressing the challenge of raising enough deposits. She said, “For them, the enormous challenge is raising a deposit.” This highlights a common, often overlooked, challenge that first-time buyers face as they move down the path to homeownership.
Paula Higgins, chief executive of the Homeowners Alliance, advocated for reform by 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.” Skepticism about existing policies We think her comments reflect a growing sentiment that it’s time to reassess current policies to make more housing accessible.
According to new research, more than 800,000 homeowners have delayed their moving plans over the last two years. The key reason for this delay is the complexity of the stamp duty arrangements. As the preceding statistic illustrates, this tax’s most impactful challenge is its sheer scope. It’s a major stumbling block for people who work to move up in the housing market.