Pressure is mounting on Andy Burnham to overhaul one of Britain’s most unpopular property taxes amid claims stamp duty is choking the housing market and trapping families in homes that no longer suit them.
Mortgage experts say the levy has “no place in a modern housing market”, arguing it is preventing first-time buyers from getting on the ladder, stopping older homeowners from downsizing and discouraging growing families from moving. The renewed calls come as Mr Burnham is reported to be considering sweeping changes to property taxation, including replacing both stamp duty and council tax with a flat annual charge of 0.48% of a home’s value or introducing a land value tax based on the value of the land beneath a property.
Stamp Duty Land Tax is paid when buying property in England and Northern Ireland, often adding thousands – and in some cases tens of thousands – of pounds to the cost of moving.
Buyers currently pay no stamp duty on the first £125,000 of a property’s value, or £300,000 for eligible first-time buyers purchasing homes worth up to £500,000. Tax is then charged at increasing rates above those thresholds.
Earlier this month, a coalition of mortgage brokers, financial advisers and property experts, organised through Newspage, called for ministers to reform the tax, claiming it has become one of the biggest barriers to a healthy housing market.
Rohit Kohli, director at The Mortgage Stop, said: “Stamp duty has become a habit the Treasury can’t kick, and everyone pays for it. First-time buyers in the South face a significant tax bill on top of deposits that are already eye-watering. Meanwhile, families wanting to upsize get no relief.
“People approaching retirement who want to downsize are raiding their pension pot to cover the stamp duty on their next home, effectively being penalised for doing exactly what the market needs them to do.”
He also claimed the tax is distorting house prices, adding: “We’ve had sellers agree a compromise price to keep a first-time buyer under the threshold – a property worth £315,000 agreed at £300,000 just to get the deal done. That’s a tax distorting real property values. It needs to change.”
Jamie Elvin, director at Strive Mortgages, described stamp duty as “one of the biggest obstacles to a healthy housing market”.
He said: “It discourages young families from upsizing and older homeowners from downsizing, leaving many homes occupied inefficiently and reducing the number of properties coming to market. The result is lower mobility, fewer transactions and wider economic consequences for everyone connected to the housing sector.”
Craig Fish, director at Lodestone Mortgages, said: “Stamp duty has no place in a modern housing market and needs complete reform, not tinkering around the edges.”
He added: “Every downsizer who stays put because the bill doesn’t add up is a home that never comes back onto the market, and every first-time buyer priced out by the same tax is a household locked out altogether. Scrapping stamp duty for downsizers and first-time buyers would not be a giveaway, it would unlock the transactions, the chains, and the tax revenue further down the line that current policy is quietly strangling.”
Stephen Perkins, managing director of Yellow Brick Mortgages, compared the tax to airline baggage charges.
He said: “You’ve already committed to the journey, chosen your destination and budgeted for the main cost, only to discover another unavoidable charge before you’re allowed to proceed. When someone decides not to move home because of stamp duty, the consequences ripple through the housing market.
“Reduce the tax on moving and more people are likely to make the move they’ve been putting off, benefiting not just those households but the wider housing market.”
Samuel Mather-Holgate, managing director of Mather and Murray Financial, said stamp duty “punishes people for moving home and gums up the entire housing market”.
He said: “Older homeowners can be deterred from downsizing because moving comes with a substantial tax bill, leaving larger family homes under-occupied while younger families struggle to upsize.
“A fairer alternative would be an annual property tax, potentially with protections or means-testing for those on lower incomes. Taxing the transaction discourages the very activity needed for a healthy housing market.”