Conservative leader Kemi Badenoch has revived a longstanding debate by pledging to scrap stamp duty on property purchases in England and Northern Ireland if the party wins the next election. Speaking at the Conservative Party conference, Badenoch described the tax as a "bad tax" and argued that its removal would improve social mobility and invigorate the housing market. Stamp duty, levied on property purchases, has been widely criticised for discouraging homeowners from moving, thereby reducing market fluidity and trapping people in unsuitable homes.

The tax generates substantial revenue for the Treasury, with property transaction taxes—including stamp duty—forecasted to bring in £15 billion in 2024-25 and climbing to £26.5 billion by 2029-30, according to the Office for Budget Responsibility. This increase is partly driven by frozen tax thresholds and surcharges on second homes and buy-to-let properties. Therefore, any government intent on abolishing stamp duty would need to compensate for this sizeable hole in public finances, possibly through hikes in other taxes, a prospect that would be politically sensitive and unpopular.

Supporters of stamp duty abolition, including economists and property experts, suggest the tax’s removal would stimulate economic activity far beyond lost revenue. The Institute of Economic Affairs’ executive director Tom Clougherty termed it the "single best reform any Government could make to Britain’s tax system," estimating that up to three-quarters of lost stamp duty revenue could be recouped via increased economic transactions, employment, and tax receipts elsewhere. This includes higher income tax from workers relocating more easily for better-paying jobs and indirect tax gains from boosted household spending on furnishings, renovations, and services triggered by increased property transactions.

Currently, around 83% of property buyers pay stamp duty, with an average bill of £4,582—threefold higher than in 2014—following Chancellor Rachel Reeves’ recent decision to reduce the tax threshold from £250,000 to £125,000. Reeves also introduced an increased surcharge on second homes and buy-to-let properties, further inflating bills for many purchasers. These changes have raised concerns that higher upfront taxes are suppressing the housing market, potentially stalling house price growth and limiting mobility for first-time buyers and homeowners alike.

The housing market itself has been exhibiting signs of slowing, with the Halifax reporting a modest 1.3% annual rise in house prices in September 2025—the slowest since April 2024—and a slight monthly decline. Contributing factors include economic uncertainties, anticipated tax hikes, and elevated borrowing costs. Finance Minister Reeves’ upcoming budget, expected to introduce further property tax reforms, has added to market caution. These reforms reportedly include proposals to replace buyer stamp duty with a seller's tax on properties above £500,000, capital gains tax on primary residences, and National Insurance taxes on rental income—a package of measures that experts warn may inadvertently reduce housing supply, restrict market movement, and hinder affordability, particularly affecting first-time buyers.

Alongside the stamp duty abolition pledge, Badenoch unveiled a broader fiscal agenda involving £47 billion in annual spending cuts targeting welfare, foreign aid, and government workforce expenditure. Half of these savings are aimed at reducing Britain’s national debt, which is nearing 100% of GDP, while the other half would enable tax cuts or increased public spending. She also committed to scrapping net zero environmental targets, representing a strategic attempt to restore Conservative party credibility following internal turbulence since Brexit.

While supporters hailed the idea of abolishing stamp duty as a catalyst to unlock the housing market and promote social mobility, some experts caution about short-term effects. For instance, estate agent analysts like Tom Bill from Knight Frank have noted that speculation about such tax reforms might cause buyers to delay purchases in anticipation, temporarily stalling the market. Moreover, stamp duty’s removal would not apply to Scotland and Wales, where separate property taxes remain.

Complementing tax policy proposals, the UK government is pursuing reforms to reduce transactional frictions in house buying. Plans include publishing search and survey data before listings to shorten the five-month average transaction time by about four weeks and introducing binding contracts to cut failed sales, which currently affect nearly a third of deals. These efficiency gains aim to lower costs—particularly helping first-time buyers by around £710—and encourage market activity, reinforcing the broader goal of rejuvenating the property sector.

The complex interplay between stamp duty, property market dynamics, government finances, and broader economic impacts highlights the delicacy of any reform. While scrapping this “prohibitive” tax promises a potentially transformative boost to housing transactions, economic growth, and social mobility, the challenge remains to balance these benefits against fiscal sustainability and to mitigate unintended consequences of alternative tax changes being considered. The evolving policy landscape, unfolding alongside a cautious housing market, will be keenly watched by homeowners, buyers, and investors across the UK.

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Source: Noah Wire Services