Stamp Out Stamp Duty: Why Labour Must Scrap Britain’s Most Damaging Property Tax
If Labour is serious about growth, intergenerational fairness and restoring some sense of hope for young people, then abolishing Stamp Duty Land Tax (SDLT) should have been in the Budget - not put in the ever-growing ‘too difficult, let’s discretely ignore it’ drawer.
Originally a physically embossed stamp (hence the name!) applied to ‘vellum, parchment and paper’, Stamp Duty was introduced in 1694 as a supposedly temporary wartime levy under William III and Mary II, intended to help finance war with France. However, SDLT, its modern homonym, only arrived in December 2003, as a transfer tax on property transactions.
Since 2003, SDLT has been levied on a slice-by-slice basis, with progressively higher rates applying to more expensive segments of a transaction. But the most significant changes have come recently. As of 1 April 2025, SDLT thresholds have returned to the 2014 to 2022 rates, with buyers of a primary residence now facing:
· 0% on the first £125,000
· 2% on the portion from £125,001 - £250,000
· 5% on £250,001 - £925,000
· 10% on £925,001 - £1.5 million
· 12% above £1.5 million.
This change has quietly tightened the screw on ordinary buyers as, between September 2022 and April 2025, no SDLT was charged on properties up to £250,000. Now, the 2 per cent band hits far earlier, raising the tax bill on even a modest family home.
The picture is even bleaker for first-time buyers. Until April 2025, they faced no SDLT up to £425,000, a considered acknowledgement that young people were already contending with high prices, an anaemic job market and stagnant wages. That relief has now shrunk dramatically: the 0 per cent band applies only up to £300,000, with 5 per cent paid on the slice between £300,001 and £500,000. As a result, a young person buying a £350,000 flat who previously owed nothing now find themselves facing a £2,500 tax, on top of an exorbitant deposit (typically around 20% in London), before they’ve even begun paying their mortgage. In an already unforgiving housing market, the direction of travel in policy since April has been unmistakable. Younger and less wealthy households are being asked to pay more, and sooner.
Compounding this is the effect of rapidly rising property prices acting like fiscal drag. Just as frozen income tax thresholds, extended in the Budget to 2031, stealthily pull more earners into higher tax bands with inflation, so too do static stamp duty thresholds pull more buyers into higher SDLT bands as house prices outpace wages. For instance, a property worth £200,000 in 2015 would have incurred £1,500 of SDLT. However, despite rates being equal, the same property would now be worth £278,767, putting it above the 5% threshold, thus now incurring £3,950 of SDLT. The result is that average buyers are increasingly treated as if they are purchasing luxurious high-value assets, even when they are simply competing in an inflated market. In London, the Southeast more broadly, and increasingly cities such as Bristol and Manchester, buyers purchasing entirely unremarkable homes now find themselves entering tax bands once intended only for the wealthy. Therefore, SDLT has become, in effect, a stealth tax on housing inflation.
Economists often talk about bad taxes, those that distort behaviour, hamper mobility or discourage productive activity. SDLT is an almost perfect example of this. It does not tax unearned capital gains or the use of property; it taxes the mere act of moving home. Clearly, if you tax transactions, you get fewer transactions. SDLT therefore dissuades people from moving for work, upsizing when starting a family or downsizing in later life.
The economic consequences are significant. A country’s productivity depends, in part, on its labour mobility - that being its ability to match workers to the right jobs in the right places. By making relocation more expensive, SDLT traps people in the wrong homes and often the wrong jobs. For instance, a young professional, with a house in Newcastle who receives an attractive job offer in Manchester must now factor in a vast tax bill simply to accept the opportunity. Or an older couple in a large, under-occupied home might remain where they are, even if a smaller and more energy-efficient property would better suit their needs, simply because they resent paying a tax on moving. The April 2025 threshold reversals have worsened these frictions precisely when the economy needs more dynamism, activity and growth - not less.
At the same time, the government’s broader tax strategy, particularly the extension of the income tax threshold freeze, has compounded the strain on younger people. To skirt around their manifesto pledge, fiscal drag increases workers’ tax burden without explicit rate rises. The Office for Budget Responsibility (OBR) estimates that this will contribute to raising around £26 billion in 2029/30. Coupled with the stamp duty changes, it paints a clear and desperate picture: younger workers are taxed more heavily on their income while simultaneously facing higher taxes when trying to secure a permanent home.
Yet, despite all the macroeconomic harm it inflicts, SDLT contributes surprisingly little to the Treasury. HMRC statisticsshow that residential SDLT receipts rose from £8.57 billion to £10.38 billion between financial years 2023/24 and 2024/25. Nevertheless, set against the roughly £1 trillion the government collects annually in total revenue, this means that SDLT raises just over 1 per cent of government revenue. Relatively speaking, it is a fiscal rounding error, but a crippling burden for those unlucky enough to be moving house.
The government should look not to blunt, politically charged and practically illogical tools like the so-called ‘mansion tax’, as it will, by design, have exploitable and market-distorting cliff-edges. Instead, with its 399 seats and 156 seat working majority, it should focus on more bold, rigorous and transformative ideas. Tax experts have long argued that Britain’s property tax system does not need extra taxes layered on top of the existing and increasingly convoluted mess. Instead, it needs structural reform, particularly of the deeply outdated council tax bands, which are still based on 1991 property values, a topic that has been supported by a number of Labour MPs. Revaluation, avoided by successive governments because of its political sensitivity, would align the tax base with today’s housing market and create far more buoyant and coherent revenue streams. This would allow the Treasury to collect modest but predictable amounts each year, rather than relying on volatile, market-sensitive peaks and troughs from property transactions.
Labour’s difficulty is, of course, that its leadership boxed itself in during the 2024 General Election campaign. The ming vase pledge not to raise income tax, National Insurance and VAT was designed for political safety. But, it has, rather predictably, created a fiscal straitjacket. With these revenue levers off the table, any credible tax reform must come from less visible, more technocratic changes such as revaluation, greater tax enforcement and the rationalisation of antiquated parts of the tax code. For this reason, abolishing stamp duty is perfectly consistent with Labour’s own constraints. Scrapping SDLT and replacing it with stable, well-designed structural reforms does not breach any of the self-imposed red lines. It would also allow the Treasury to rely on annual, predictable revenue rather than the arbitrary timing and volume of house purchases, a further positive for the credibility of the Chancellor’s ‘fiscal rules’.
Crucially, abolition does not have to be instantaneous, but it does rely on consistent and reliable messaging. The government could phase out SDLT on main residences over a Parliament, starting with first-time buyers and homes under £500,000, while the necessary reforms to council tax are implemented. This gradual, staged approach avoids fiscal shocks while immediately signalling that the government is serious about mobility, growth and fairness.
Most importantly, the case for abolition is not ideological, it is practical. Stamp duty traps older homeowners in larger properties, preventing the natural churn of the housing market. It penalises young people who need to move to advance their careers, form families or simply access housing they can afford. It is volatile, inefficient and economically perverse. And, since April 2025, its flaws have only deepened, hitting the very groups Labour claims to champion. If Labour wants to demonstrate that it understands how bleak the housing ladder now looks to young people, abolishing stamp duty on main residences would be a powerful signal. It would cut the cost of forming households, encourage labour mobility and, perhaps most importantly, remove a clear drag on the government’s supposed core principle: economic growth.
A government that promised to not raise taxes on ‘working people’ cannot continue ratcheting up transaction taxes and freezing thresholds while expecting nobody to notice. The choice before Labour is stark: support a tax that strangles mobility, or build a modern property tax system that supports growth, fairness and aspiration. Indeed, if Labour is serious about real hope, not just headlines, it must choose the latter and put the abolition of SDLT at the heart of a credible, pro-growth agenda.
