Should stamp duty be scrapped?

Conservative leader Kemi Badenoch’s headline policy proposal from conference season was a pledge to scrap stamp duty.

The tax is paid when people buy homes in England and Northern Ireland with the amount dependant on how much the property is bought for. No stamp duty is paid on homes bought for less than £125,000 while first-time buyers do not pay anything for homes bought for under £300,000.

“Stamp duty is a bad tax,” said Badenoch.

“We must free up our housing market, because a society where no one can afford to buy or move is a society where social mobility is dead.”

Here’s the argument for and against scrapping stamp duty.

Why stamp duty should be scrapped

House prices are already unaffordable for many – costing 7.7 times the average salary in England – and stamp duty can both put off housebuilders and be another hurdle for people looking to buy a home.

Tom Clougherty, executive director of the think tank Institute of Economic Affairs, said: “Abolishing stamp duty is the single best reform any government could make to Britain’s tax system.

“As things stand, this outdated and uneconomic levy is wreaking havoc on our already troubled housing market – by deterring sales and depressing housebuilding.

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“Indeed, research suggests that the wider social and economic harms are equivalent to three-quarters of the revenue raised – and that’s on top of the loss to the people actually paying the tax.”

Housebuilders have also argued that stamp duty makes it harder to build much-needed homes as due to the uncertainty over demand. Bellway CEO Jason Honeyman called for a long-term deposit scheme for first-time buyers to grow confidence.

Rightmove has also called for stamp duty thresholds to be shifted to reflect higher prices. The property site argued 53% of properties were free from the tax for first-time buyers but that has fallen to 40% this year.

Why stamp duty shouldn’t be scrapped

Scrapping stamp duty will mostly benefit those who are already on the housing ladder, leave the government with a hole in the public purse to fill and risk pushing up house prices.

The tax generated £11.6 billion for the economy in 2023-24 with £8.5bn of that coming from residential property sales. Both figures fell by about a quarter compared to 2022-23.

As stamp duty breaks have shown in recent years, a rise in demand for homes as a result can see house prices increase.

Theo Bertram, director at Social Market Foundation, said: “Stamp duty is a brake on the housing market, stops people moving for work, prevents more downsizing. Scrapping it solves these issues, but the benefit will disproportionately go to homeowners and to those in the south east and London, who will gain the most.

“The credibility test for the Conservatives is whether they can really make sustained savings of at least £12bn annually to fund the cut. Reforming council tax and introducing a property-based tax could make the stamp duty cut more credible, sustainable and fairer, helping those on lower incomes and around the country.”

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