Rumours have been circulating for several months that Chancellor Rachel Reeves is considering replacing stamp duty with a tax on homes worth more than £500,000.
The Conservatives proposed to abolish stamp duty on primary residences at their latest conference, while the Liberal Democrats and Reform have suggested reforms to the tax in prior manifestos.
A recent Institute for Fiscal Studies (IFS) report said stamp duty was set to generate £24.5m by 2030 but causes an “inefficient allocation of property”.
David Morris, head of homes at Santander UK, commented: “Stamp duty is in need of reform. We would support calls for the government to review how this outdated tax can be changed to create a healthier and more dynamic home buying market.”
He pointed to a recent report that the bank had commissioned that found that one in three transactions were failing and cost the UK economy £1.5bn every year.
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“The system must change, and stamp duty remains one of the clearest barriers to progress. A healthy housing market is predicated on both supply and demand. The government has already made significant progress in improving demand within the housing market.
“Recent affordability and stress test changes have enabled us at Santander to help tens of thousands of extra people realise their homeownership aspirations. Yet stamp duty stifles this progress, distorting the housing market by discouraging activity through raising the fundamental cost of buying a home,” he added.
Morris said changing stamp duty to a “transactional tax” would “open the market to more activity”.
He explained that having a transactional tax would encourage ‘right-sizers’ to move and free up some of the estimated 10 million empty bedrooms currently sitting vacant across the country.
“It would also help buyers relocating for work, and remove another major hurdle for first-time buyers, particularly in London and the South East, where prices remain higher than elsewhere and where the tax therefore is at its highest.
“However, any revision to [the] demand side must be matched with bold action when it comes to supply. A renewed commitment to housebuilding – delivering on the 1.5 million new homes target – would give the market the energy, confidence, and long-term stability it needs.
“2025 is shaping up to be the year of the buyer. Rethinking stamp duty would ensure it’s also the year we fix the foundations of the housing market and release more urgent[ly] needed bedrooms into the market,” Morris added.
