Though there may be some positive spillover effects from the tax cuts the Conservative Opposition are now promising, all of them, especially abolishing Stamp Duty, disproportionately benefit upper-middle class households.
A first-time buyer of an average English home pays no Stamp Duty, because their threshold for payment is a £300,000 valuation. Right until £500,000, first-time buyers pay reduced Stamp Duty rates. So in areas where average house prices are higher than £300,000, such as the South East and East of England, the average first time buyer is only paying around £2,000 to £4,000 in Stamp Duty.
It is in London that Stamp Duty is painfully high, which partly explains why the tax is so obsessively loathed by political and media types who want to live and move in the City. London is certainly expensive, but it can’t be that exclusionary, as the Stamp Duty abolitionists argue: why would the population keep rising, alongside rental and purchase prices?
It may be the case that non first-time buyers might be put off from upsizing because of Stamp Duty. But the liability for an averagely priced house across the whole of England is under £5,000. Research suggests other factors are more important for deciding not to move, even if people want to: high house prices and lack of suitable housing. Indeed, the evidence suggests that reducing or scrapping Stamp Duty only increases house prices, especially in a supply-constrained market, simply exacerbating the principal barrier to upsizing.
The idea that Stamp Duty is a massive impediment to downsizing is a prevailing but unconvincing argument. Most older people stay put because of the community they’ve built around them and to keep extra rooms for visiting children and grandchildren. Regardless, most older people have full equity of their house: the net gains from selling are likely to dwarf any Stamp Duty on the smaller house they are moving into.
Stamp Duty brought in just shy of £14 billion for the exchequer in 2024-25. It is deeply fiscally irresponsible to propose abolishing it without outlining an alternative property tax regime. By not doing so, you are in danger of spooking the bond markets and freezing the housing market. A gradualist approach would be best: slowly phase out Stamp Duty, prioritising first-time buyers and those buying less expensive homes first, at the same time as increasing Council Tax, so eventually the latter becomes an annual proportional property tax.
Trouble with this alternative approach, however, is that high property taxes will effectively become frequent and compulsory, whereas Stamp Duty is a one-off and in effect voluntary, as you only pay it if you choose to move house. This may be harder to stomach for households, even if many could pay less over a longer period. And shifting to this new system in a way that means that calculations are made so people are not taxed twice and disproportionately — for Stamp Duty from the legacy system to a proportional property tax in the new system — will be incredibly challenging.
If the Conservative Opposition truly wanted to prioritise tax cuts to boost economic security and mobility, they would have prioritised reversing the Labour Government’s rise to Employers’ National Insurance and cutting employees’ National Insurance. But they have promised tax cuts for the very richest instead, including reversing the VAT rise on school fees and the abolition of Agricultural Property Relief on Inheritance Tax. This is the Conservatives’ comfort zone; they need to outline bolder and counter-intuitive cuts to entitlements and spending, especially on older people, if they want to convince a much wider group of voters that they are the party for economic responsibility, growth and mobility.
