Proposed stamp duty cuts don’t go far enough – we need reform

Simon Gerrard

It has been recently reported that the chancellor is considering making cuts to stamp duty in the upcoming Autumn budget. Specifically, it is rumoured that the threshold before stamp duty is payable will increase from £250,000 to £300,000.

It is hard to see this as anything more than a last-ditch attempt by the party in power to get voters onside by offering an ounce of aspiration that people might be able to buy their own homes, as well as trying to give the impression that this government is serious about rectifying the broken housing market.

The reality is that these are not reforms, they are purely tinkering and do not touch the sides. If the government were serious about changing stamp duty to create a market that is responsive to people’s needs, it would be taking more drastic steps that would actually help people; namely, reversing stamp duty so that it is paid by the seller, and scrapping it entirely for older homeowners who are downsizing.

Holes in the plan

At first glance, the stamp duty reform that the government is suggesting may appear to be positive. However, a closer look at the plan reveals that it is nothing more than a damp squib.

Given that house prices rocketed by 20.4% over the pandemic (from January 2020 to December 2022), according to Halifax, it is questionable whether this offering even cancels out pandemic inflation, and that is without taking into account inflation over the past five quarters.

These plans are entirely insufficient, and for the vast majority of aspiring homebuyers, especially those in major cities, it will have no lasting impact on the property market. Whilst inflation has come under control after a period of severe turbulence, it remains a burden on the market and transaction rates are poor. As a result, we are faced with a limp, lifeless market and a government acting like a surgeon who is unwilling to do what is necessary to resuscitate it.

History repeating itself

The reform being offered now is consistent with the government’s history of half-hearted measures on stamp duty, which often recognise that change is needed, but lack a party with the gumption to carry anything meaningful through.

The previous cut to stamp duty, introduced in the infamous Autumn ‘mini-budget’ of 2022, was a positive step forward but came with an inbuilt expiry date of 31st March 2025.  Both national and local government seem willing to experiment with stamp duty reforms, but not to offer long-term, practical solutions.

I have seen first-hand the way rising house prices, and therefore rising stamp duty costs, are affecting families. In particular, those with small children, who have been able to get a first foot on the housing ladder but are now unable to take the second step into a family-sized home. As a result, they are stuck in unsuitably small flats and their quality of life is suffering.

Smashing the bottlenecks

I believe that there is a solution. We need to fully reverse stamp duty, so that it is paid by the seller, rather than the buyer. In addition, the tax should be scrapped altogether for older homeowners who are downsizing.

The first measure, if introduced, would help break one of the major bottlenecks that is currently keeping the market ground at a halt; second-steppers who are unable to move their young families out of small flats to family-sized homes. This reform would have a profoundly positive impact on the affordability of moving up the housing ladder for the many families who are currently unable to.

However, this would not work in practical terms for older homeowners who are living in unsuitably large homes. The second measure, to scrap stamp duty for empty-nesters, would not only resolve this, but it would actively encourage them to find a house that better suits their needs. In supporting downsizers, we would unlock the supply of family-sized homes for the second-steppers who need them more.

Lastly, these policies would also benefit first time buyers, who would remain exempt from the tax regardless of how high property prices climb, as they would have no property to sell. They would also enjoy the benefits of a more free-flowing market that increases the availability of first-time homes as families move up the housing ladder.

An end to a tax on ambition

In its current state, stamp duty is a tax on ambition. It puts obstacles in the way of hardworking families and young people who are attempting to find their way on, or up, the housing ladder. Meanwhile, at the top of this ladder, there is no tax incentive whatsoever for people to downsize.

In the midst of a technical recession, should we not be encouraging home-buying ambitions rather than flattening them? After all, a free-flowing property market would see a greater volume of transactions, which would increase the revenue that the government is able to generate through stamp duty.

As it stands, the proposed cuts to stamp duty are like trying to mop up an oil spill with a hanky. Reversing this tax on ambition would allow for a housing market that is responsive to people’s needs, rather than squashing people’s dreams of owning a home.

We have found ourselves in a situation where the UK housing market is no longer fit for purpose, and there is simply no use tinkering around the edges of a broken machine, as the government proposes to do.

That is why I am campaigning for whole-scale reform that introduces the two measures described in this article, through a petition on Change.org.

Simon Gerrard is managing director of Martyn Gerrard estate agents

 

Well-known estate agency boss launches petition to reform stamp duty

 

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One Comment

  1. PRman

    Same as last time this spurious story ran! The buyer pays because even with the suggested reforms it’s factored into the price. Either campaign for Stamp Duty abolition or find another means of self publicity. After all this time and fewer than 1,200 signatures on Change.org PIE should accept this is a non-story.

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