What would be the effect of the Conservatives abolishing Stamp Duty (SDLT)?

Abolishing Stamp Duty (in the UK, that’s Stamp Duty Land Tax or SDLT, at least on main residences) is a major proposal the Conservative Party has floated — there’d be several likely effects — some good, some risky. What follows is a breakdown of what experts expect might happen, and what to watch out for. 

 

What the proposal is

The idea is to remove SDLT on primary homes bought by UK residents (i.e. no stamp duty on a main residence). Other categories — like second homes, corporate/commercial purchases, non-UK residents, etc. — would still pay. The estimated cost to the Treasury is substantial: ~£9 billion a year in lost revenue by 2029-30 under the Conservatives’ plan. 
 

Potential benefits

1. Lower upfront costs for buyers

   Buying a home involves many costs up front. Stamp duty can be a large part of that, especially on more expensive homes. Abolishing it reduces the barrier to moving or buying in the first place. First-time buyers and those upgrading could benefit.  

2. Boosting housing market activity and mobility

   Because stamp duty added a cost to moving, many people postpone selling or moving. Removing that cost could free up housing stock: more people would move, buy, sell, possibly downsize. This helps match people to houses more efficiently.  

3. Economic stimulus

   Increased transactions would mean more demand for services (surveyors, house movers, legal, builders for refurbishments, mortgage brokers, etc.). This has knock-on effects in construction, finance, etc. It might also improve labour mobility (people more willing to move for jobs if moving costs are lower).  

4. Fairness / intergenerational equity arguments

   Removing a big tax on moves helps younger people (“getting on the ladder”), or people locked into homes they’d rather leave but can’t afford to move from. There are arguments from think-tanks that many people are penalised simply for owning a property due to stamp duty when moving.  

 

Potential downsides or risks

1. Lost revenue and fiscal cost

   Stamp duty brings in a lot of money (~£10-12 billion a year, though a portion from second homes etc.). Abolishing it on primary residences means the Treasury needs to find that money elsewhere: higher taxes somewhere else, or cuts to spending, or both.  

2. House prices might increase

   If buying becomes cheaper, demand tends to go up. But unless supply of housing also increases, that extra demand may drive up house prices. That could partly (or wholly) eat up the benefit of removing stamp duty for buyers — especially in popular or supply-constrained areas. Experts warn of this. 
   In past temporary reductions (“stamp duty holidays”), this effect has been observed: spikes in demand, raising prices, reducing the net benefit for certain buyers. 

3. Uneven benefits

   The biggest absolute savings from abolishing stamp duty go to those buying higher-value properties (because that’s where stamp duty adds up more). So wealthier buyers or those moving to more expensive homes benefit a lot; whereas people buying lower-cost homes, first-time buyers in cheaper regions etc. see smaller gains. Also, people who recently bought and paid full stamp duty may feel unfairly treated.  

4. Possible pressure on rents

   If landlords see less favourable tax treatment, or their cost base changes, it might affect their behaviour. Also, if affordable home purchases get more expensive due to rising prices, some people may rent longer, increasing demand in the rental sector and pushing rents up.  

5. Supply constraints

   Removing the tax won’t help much if there’s not enough housing being built. If supply is tight, gains might be marginal in some regions. Also, infrastructure, planning, environmental constraints etc. may limit what can be done. So policy risks being more effective in some places than others.

 

Net impact / what to watch

• Short term boost: There would likely be a surge in house-moves and transactions soon after abolition, as people who held off because of cost would move.
• Medium to long term changes: The effect on prices, housing supply, local markets might settle to a new equilibrium. The gains for some buyers might be eroded by price inflation if demand increases strongly without matching supply.
• Government trade-offs: To cover the revenue gap, governments might raise other taxes or cut spending. That can have knock-on effects elsewhere.
• Regional differences: Areas with low supply or very high demand (London, South East) could see more upward pressure on prices; regions with more slack might benefit more.
• Behavioral shifts: More people might downsize, move for jobs, freeing up homes, improving efficiency in housing stock use.

Whilst we do not know which party will win in the next election and whether such a proposal would be pushed through parliament, we can know that any significant change such as this would create a significant revenue gap and we must be prepared for the consequences of such a radical change. 

(Sources for this article include: The Negotiator, Institute for Government, Finance Monthly and Mortgage Solutions)