No tax is popular, but stamp duty is more unpopular than most. Moving house is probably the most expensive thing you will ever do – and a stamp duty bill can add thousands of pounds to the overall cost.
Over the past year, UK house prices have risen to £290,000 on average, leaving the typical buyer with a stamp duty bill in the region of £2,000 at current rates. This rises to £13,550 for buyers in London, where the average house price is £521,000.
For the past couple of years, buyers have enjoyed a temporary increase to the nil-rate thresholds, but these are set to fall back to their original levels from 1 April 2025. What’s more, it looks unlikely that Labour will extend this form of relief when chancellor Rachel Reeves delivers her first Budget on 30 October.
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Under current rules, those buying a single property only start paying stamp duty once the property’s value exceeds £250,000. This rises to £425,000 for first-time buyers. However, these are temporary thresholds that were introduced in 2022. They are due to expire on 1 April 2025, at which point they will drop back down to £125,000 and £300,000 respectively.
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On the campaign trail, Labour said it did not plan to extend the current level of stamp duty relief for first-time buyers, despite the Conservatives promising to make the £425,000 threshold permanent. This difference in policy was perhaps surprising given Labour’s focus on first-time buyers elsewhere in its manifesto, for example in its Freedom to Buy pledge.
“Bear in mind that Labour took this position at a time when they were stating their plans did not require tax rises. Since then, it is claimed that a ‘black hole’ has been uncovered in the nation’s finances requiring ‘painful decisions’ at [the] Budget,” says Jason Hollands, managing director at wealth management firm Evelyn Partners.
Despite this, stamp duty remains problematic, with critics arguing that it is clogging up the property market by acting as a disincentive to downsizing. Against this backdrop, we take a closer look at the tax. How much revenue does stamp duty raise for the government, what has Labour said about it, and why do critics think it should be cut or abolished?
How will stamp duty changes hit the property market?
Currently, an estimated 80% of first-time buyers pay no stamp duty on property purchases, with 14% paying partial duty.
A return to previous thresholds, as expected from April 2025, would result in an additional 20% of first-time buyers becoming liable for the controversial property tax and a further 14% would be required to pay a partial amount.
Research by Zoopla suggests the impact would be more keenly felt in southern England. The average first-time buyer in London and the South East would pay £5,600 and £1,390 respectively, compared with nothing today.
Faced with higher buying costs, first-time buyers will want to pay less for homes in these areas which will keep price rises in check, Zoopla added.
How to calculate stamp duty
You pay stamp duty land tax (SDLT) when you purchase a property over a certain value, sending the money to HMRC by completing an SDLT return. You need to do this within 14 days of completing the purchase of the property. Your solicitor or conveyancer will usually file this on your behalf and add the tax to their fees.
The amount of stamp duty owed depends on a number of factors, including the value of the property, whether you are a first-time buyer, and whether you own any other properties already.
Under current rules, you only pay stamp duty on properties worth more than £250,000 (or £425,000 if you are a first-time buyer). As introduced previously, these thresholds are temporary and are set to fall back to £125,000 and £300,000 respectively on 1 April 2025.
Our stamp duty calculator provides further information on SDLT rates and how much you are likely to pay.
How much does stamp duty raise for the government?
Stamp duty land tax raised £11.6 billion for the government in the 2023/24 tax year, according to the latest HMRC estimates.
For context, this is higher than the amount brought in by inheritance tax – another widely-hated revenue generator. IHT receipts hit £7.5 billion in the most recent tax year, a record sum. Meanwhile, capital gains tax (which some think Reeves will hike in her Budget) is estimated to have raised £14.5 billion over the same period.
Each of these pales in comparison to income tax, National Insurance contributions and VAT, though. Together, these three taxes account for almost two-thirds of total tax revenue, according to the Institute for Fiscal Studies.
Despite this, SDLT has been a decent source of income for the government in the past. In the decade between 2010 and 2020, “the tax base for property transaction taxes grew faster than GDP on an annual basis in nearly all years,” according to the Office for Budget Responsibility (OBR). “This was due to increases in both the average property price and the number of properties being bought and sold.”
SDLT receipts can be volatile, particularly in periods of financial crisis when transaction volumes fall, but the OBR expects them to raise £14 billion in 2024/25. This would amount to an estimated 1.2% of total tax receipts.
On top of this, we can expect SDLT tax receipts to rise from 1 April 2025 (when the nil-rate thresholds return to their previous levels).
According to the OBR, the temporary SDLT tax relief measures introduced in 2022 have cost the government £1 billion per year, on average.
The problem with stamp duty
While stamp duty is a decent revenue raiser for the government, critics say it causes stagnation in the property market and dampens growth, thereby counteracting its economic benefits. As recently as last month, the Organisation for Economic Co-operation and Development (OECD) suggested the government consider scrapping the tax entirely.
The main argument against stamp duty is that it discourages people from moving house – in particular those who are thinking about downsizing. Older people hang on to large family homes even once their children have moved out and, in turn, this reduces housing supply.
Of course, less supply means higher prices – bad news when the country is in the midst of a housing crisis. Stamp duty also unfairly penalises those who live in areas like London, where house prices are significantly higher than the national average.
But it’s not just buyers who suffer. IFS director Paul Johnson says stamp duty is bad news for renters too. Those who own second homes (including buy-to-let properties) pay a 3% stamp duty surcharge, first introduced in 2016. These costs are typically passed on to tenants in the form of higher rents.
Despite this, Labour’s stance on the campaign trail suggests stamp duty reliefs are off the table when it comes to Reeves’s Budget on 30 October.
“I suspect [the government] will instead message that, rather than temporary measures to help people get on the housing ladder, their plans for shaking up the planning system and building 1.5 million new homes will address the root problem facing first-time buyers, namely the undersupply of homes,” says Hollands.
