Chancellor Rachel Reeves is rumoured to be considering scrapping the much-hated stamp duty tax in her Autumn Budget on Wednesday 26 November.
The idea of abolishing stamp duty resurfaced in October when Conservative Party leader Kemi Badenoch’s pledge to abolish stamp duty should the Tories form the next government received a standing ovation at the annual party conference and was broadly welcomed by the property industry.
“The Budget is a big distraction, and is later in the year than usual, with many would-be buyers waiting to see how their finances will be impacted,” said Colleen Babcock at Rightmove.
Is Rachel Reeves likely to scrap stamp duty?
Industry experts are largely in agreement that we desperately need property tax reforms to reenergise a stagnant housing market, however, London’s high prices and insufficient numbers of affordable new homes are also significant barriers to buying.
Faced with the highest average property prices in the UK, London homebuyers would see the greatest impact of any ban. An average home in the capital now costs £562,000 according to the Office for National Statistics, which equates to a stamp duty bill of £18,100 payable within 14 days of buying a home.
£18,100
The average stamp duty tax bill in London
Indeed, sixty per cent of all stamp duty is paid by homebuyers in the south of England, according to property portal Zoopla.
But, as popular as it may be with potential homebuyers, scrapping stamp duty would leave a gaping hole in the public finances — the tax raised £11.6 billion in the 2023-24 financial year, down from £15.4 billion in 2022-23.
“What I see is young people buying more expensive houses really than they can afford because they know they can’t (afford to) pay stamp duty twice.”
“The other thing I’m seeing a lot of is people altering two and three-bed houses rather than moving, because the cost of moving is so high.
“I think we’re actually damaging our first-time buyer housing stock because of stamp duty,” added Allsop.
The Chancellor’s Budget is unusually late and, following months of kite-flying involving property tax changes, has already been blamed for uncertainty in the housing market
The London Standard
The cost of moving home in London is now a staggering £32,800 on average, according to new data from comparison site reallymoving which factors in stamp duty, conveyancing, estate agent fees, surveys and removals costs.
“Everyone would welcome the removal of stamp duty, it is a hugely inefficient tax that acts as a major drag on the housing market, discouraging people from moving and downsizing,” said Richard Donnell at Zoopla, who also acknowledged that the potential changes could cause disruption in the short term.
“The longer term opportunity is to get more people moving home which will help support economic growth and labour mobility,” Donnell added.
Guy Meacock, director of buying agency Prime Purchase, said: “Removing stamp duty would be transformative but one wonders how on earth the government would finance such a sweeping change.
“More realistically, a rebasing of council tax, using up-to-date property values, would be far more equitable and go some way to helping end the inherent injustice in the system.”
There is also the risk that abolishing stamp duty would push house prices up even further, as happened during the Covid stamp duty holiday introduced by Rishi Sunak in 2020.
What would replace stamp duty?
Over the summer, Treasury officials were asked to look into the ramifications of introducing a new tax on the sale of homes worth more than £500,000.
A national property tax would replace stamp duty for owner-occupied homes, and rumours suggest a local property tax could eventually replace council tax.
Low-earning homeowners in expensive areas, who can currently avoid property taxes by staying put, would be hit hardest by an annual tax.
Half of all home sales over £500,000 are in London, with a further 26 per cent in the South East, according to analysis of Land Registry data by property company Hamptons.
But the costs associated with moving would certainly fall furthest in the capital.
According to the data from reallymoving, the average cost of moving in London for a homeowner (buying and selling) would drop to £11,036, based on the median purchase price of £635,000, as buyers would no longer face a stamp duty bill at the point of purchase.
“They would instead face an annual property tax of £729, but it would take 30 years of ownership before this expenditure equalled the current stamp duty bill,” said Rob Houghton, CEO of reallymoving, who added that London first-time buyers would see the cost of moves fall from an average of £8,192 to £2,692. Based on a median purchase price of £410,000, which would be beneath the £500,000 threshold for an annual tax.
“Replacing stamp duty with an annual property tax would fundamentally change the economics of moving in London, dramatically reducing upfront costs and making it easier for people to move up or down the ladder as their circumstances change, such as accommodating a growing family or a new job,” said Houghton.
“For first-time buyers it would be transformative, cutting years off the time it takes to save for a first home, which our data shows currently sits at over eight years including moving costs and a 10 per cent deposit.”
Who would have to pay the mansion tax?
Another possible measure being considered by the Chancellor is a so-called ‘mansion tax’ on homes valued above £2 million. Rumours suggest that there would be a one per cent levy on the value above this threshold. Owners of properties worth £2.5 million, for example, would pay an extra £5,000 a year in property tax.
Over 60 per cent of homes over £2 million are in London, with just under 20 per cent in the South East, according to analysis by Savills.
How much stamp duty do we pay now?
First-time buyers are exempt from stamp duty up to £300,000 as long as the total property purchase price is no more than £500,000.
There is a five per cent surcharge on second homes and a two per cent surcharge for non UK residents.
|
Price of property |
Stamp duty (from 1 April 2025) |
|
Up to £125,000 |
Zero |
| The portion from £125,001 to £250,000 |
2% |
|
The portion from £250,001 to £925,000 |
5% |
|
The portion from £925,001 to £1.5 million |
10% |
|
Anything above £1.5 million |