Five Ways Abolishing Stamp Duty Could Transform the UK Housing Market

In a landmark policy announcement at the Conservative Party Conference in October 2025, Leader Kemi Badenoch pledged to abolish Stamp Duty Land Tax (SDLT) on primary residences in England and Northern Ireland if the Conservatives win the next general election. This move aims to alleviate the financial burden on homebuyers and stimulate the housing market. However, experts warn of potential unintended consequences that could reshape the housing landscape.

1. Potential Rise in House Prices

Abolishing stamp duty could lead to increased demand in the housing market. Historically, temporary reductions in stamp duty have resulted in short-term price surges. For instance, during the COVID-19 lockdowns, stamp duty holidays contributed to a spike in property prices. Experts caution that a permanent abolition might have a similar effect, with the savings from the tax cut potentially being absorbed into higher asking prices. Lucian Cook, Head of Residential Research at Savills, suggests that the current stamp duty bill could simply pass through into prices, making it more challenging for first-time buyers to afford homes.

2. Disproportionate Benefits for Wealthier Buyers

BBC News reports that while first-time buyers purchasing homes under £300,000 would not benefit from the abolition, those buying more expensive properties would see significant savings. For example, a buyer of a £1 million home could save up to £43,750. However, the majority of first-time buyers do not pay stamp duty due to existing exemptions. Sarah Coles, Head of Personal Finance at Hargreaves Lansdown, notes that the primary challenge for these buyers is raising a deposit, not the stamp duty itself.

3. Increased Housing Market Mobility

Abolishing stamp duty could encourage homeowners to move more freely, thereby increasing market fluidity. The Institute for Fiscal Studies (IFS) highlights that stamp duty is one of the most economically damaging taxes, discouraging people from moving for work or downsizing. By removing this barrier, older homeowners might be more inclined to sell their properties, making them available to younger families and improving overall market dynamics.

The burden of Stamp Duty Land Tax visually represented as stacked wooden blocks, highlighting its impact on homebuyers.

4. Potential Fiscal Challenges

Stamp duty currently generates over £10 billion annually for the Treasury. Abolishing it would create a significant revenue gap. The IFS estimates the cost to be around £4.5 billion per year, while the Conservative Party's own estimate is closer to £9 billion according to GOVExplained. To offset this loss, the government would need to identify alternative revenue sources, such as increasing other taxes or implementing spending cuts. However, the proposed £47 billion in annual spending cuts may not fully compensate for the lost revenue, raising concerns about the sustainability of such a policy.

5. Impact on Renters and the Rental Market

While the policy aims to benefit homeowners, it could have unintended consequences for renters. The IFS suggests that abolishing stamp duty for primary residences could discourage landlords from purchasing rental properties, as they would still be subject to the tax. This could lead to a reduction in the supply of rental properties, increasing competition and potentially driving up rents. Additionally, the policy could increase the tax advantage of owning a home over renting, further discouraging investment in the rental market.

Additional Considerations

Regional Disparities: The impact of abolishing stamp duty would vary across the UK. In regions like London and the South East, where property prices are higher, the tax savings would be more substantial. Conversely, in areas with lower property values, the benefits would be less pronounced, potentially exacerbating regional inequalities.

Alternative Tax Models: Some experts advocate for replacing stamp duty with a more progressive property tax system. Such a system could involve annual taxes based on property value, ensuring a steady revenue stream for the government and reducing the risk of market distortions caused by one-off taxes. However, implementing such a system would require careful consideration of its impact on homeowners and the broader economy.

People Also Ask

How would abolishing stamp duty affect first-time buyers?

First-time buyers purchasing homes under £300,000 would not benefit from the abolition, as they are already exempt from stamp duty. However, those buying more expensive properties would see significant savings, potentially making it easier for them to afford their homes.

Could abolishing stamp duty lead to higher house prices?

Yes, experts warn that increased demand resulting from the abolition could drive up house prices, potentially offsetting the savings from the tax cut. This could make it more challenging for buyers to afford homes, especially in high-demand areas.

What are the potential fiscal implications of abolishing stamp duty?

Abolishing stamp duty would create a significant revenue gap for the government. The IFS estimates the cost to be around £4.5 billion per year, while the Conservative Party's own estimate is closer to £9 billion. To offset this loss, the government would need to identify alternative revenue sources, such as increasing other taxes or implementing spending cuts.

How might abolishing stamp duty impact renters?

The policy could discourage landlords from purchasing rental properties, as they would still be subject to stamp duty. This could lead to a reduction in the supply of rental properties, increasing competition and potentially driving up rents.

Conclusion

Abolishing stamp duty on primary residences represents a significant policy shift with the potential to reshape the UK housing market. While the policy aims to alleviate the financial burden on homebuyers and stimulate market mobility, it could also lead to unintended consequences, such as higher house prices and increased fiscal pressures.

In my view, the Tories are promising anything they can—even policies that may not make financial sense—because they are increasingly worried about becoming politically irrelevant. As the debate continues, it is crucial to consider the broader implications of such a policy and explore alternative approaches to reforming property taxation.