Kemi Badenoch has announced plans to scrap stamp duty completely if the Conservative Government were to take office again. During her leaders’ speech at the Conservative Party Conference on Wednesday, Ms Badenoch said: “Stamp duty is a bad tax. We must free up our housing market, because a society where no one can afford to buy or move is a society where social mobility is dead.”
She said she had looked at options for changing thresholds for stamp duty and decided it was not enough. Ms Badenoch added: “The next Conservative government will abolish stamp duty on your home.”
Stamp duty is a levy on homes costing more than £125,000. The threshold for first-time buyers is £300,000. The rates vary depending on the price of the property and whether it is a first or additional home.
While the tax is widely criticised, with many arguing it brings another obstacle to an already challenging market, experts have raised concerns about scrapping the policy completely.
Michelle Lawson, director at Fareham-based Lawson Financial said: “As with everything the devil is in the detail. It raises more questions and problems than it solves. Will it be scrapped completely or will it be scrapped and replaced with something else?”
Stephen Perkins, managing director at Norwich-based Yellow Brick Mortgages added: “Of course scrapping stamp duty will be hugely welcome and positively received, but the detail is what will be brought in to replace it?
“The Government cannot afford to lose that revenue, so surely will be just paid through some other part of the transaction.”
Some have warned the policy could have a knock-on effect on house prices.
Lucian Cook, head of residential research at Savills, warned: “The impact that abolishing stamp duty would have is largely dependent on what replaces it. If, and this is a big if, it is a simple tax giveaway, the likelihood is that the current stamp duty bill simply passes through into house prices.
“On that basis, that would indicate an uplift in house prices of around 1.4% to 2.1% on average or £5,100 to £7,500 depending on exactly how it is implemented. However, given the way stamp duty works, this would be unevenly distributed across the country’s housing stock with a much greater impact on high value homes, meaning London and the South East would benefit most.”
He added: “It is difficult to model what it would do to transactions, but it should free up transactions, especially among the groups that bear the biggest exposure to taxes. With the reliefs already available, it would have the least impact on first-time buyer numbers, with much bigger impacts on mortgaged home buyers and downsizers.”
Rohit Kohli, director at Romsey-based The Mortgage Stop, said “When you’re in opposition and unlikely to win power, you can promise whatever you like because you know you won’t have to deliver it. Scrapping stamp duty sounds great in a conference speech, but it’s a distraction from the real issue – the lack of affordable homes. Getting rid of the tax won’t suddenly make buying easier it’ll just push prices up further without tackling supply.
“If politicians were serious about helping first-time buyers, they’d focus on planning reform and building homes people can actually afford, not soundbites.”
Others have welcomed the policy, which could boost homeownership numbers particularly in expensive areas.
Justin Moy, managing director at EHF Mortgages said: “Stamp Duty is singlehandedly slowing the property market to a crawl, so this significant pledge by Conservatives will be welcomed not only by those looking to buy, but the industry as a whole.
“Scrapping this tax will encourage greater home ownership, especially those in expensive areas who have faced potential Stamp Duty costs of £30,000 to £40,000 on family homes. I don’t see this increasing property prices as long as it is seen as a long-term strategy. While demand will automatically increase, there will equally be more supply as those waiting for improvements will be taking this opportunity to move.”
A spokesperson from the HomeOwner’s Alliance added: “We strongly support the Conservative Party Leader’s call to abolish stamp duty. We’ve long campaigned to scrap stamp duty for people buying a home to live in. Kemi Badenoch is right: it’s a tax that traps households, hampers mobility and suppresses market activity.
“Homeownership is the foundation of a fairer and more secure society — but stamp duty has denied that opportunity to too many for too long. Our research shows over 800,000 homeowners have shelved moving plans in the past two years, and stamp duty is a major barrier. By scrapping it, we don’t just help first-time buyers: we unlock supply, free up stock, stimulate related trades and get the housing market moving. This will be a real vote winner.”
Stamp duty land tax brought in an estimated £13.9billion in the last financial year, but a large proportion of this is from additional homes and other buildings. The Institute for Fiscal Studies (IFS) has estimated that abolishing stamp duty on primary residences will cost around £4.5billion.
However, Ms Badenoch said the Conservatives had “cautiously” estimated that scrapping the policy would cost £9billion.
Mrs Badenoch insisted she could meet this promise while sticking to her new “golden rule” to spend only half of any savings made through spending cuts, with the rest going to reduce the deficit.