Raise the stamp duty threshold to £1 million

Introduction

Stamp duty land tax (SDLT) is levied on property transactions above a threshold (£125,000 for residential properties and £150,000 for non-residential properties). By introducing another charge on homeowners to the already costly process of moving, SDLT means that for some people who might consider moving, the benefits no longer outweigh the costs. They either decide not to move at all or delay doing so. SDLT is a highly distortionary and economically destructive tax.

A couple’s location preferences might change, for example, when they retire from work. Living near leisure facilities or family might become relatively more important than living somewhere convenient for where they used to work before they retired. They might also prefer a smaller property if their children have recently moved, particularly if downsizing could help their children buy a property of their own to make space for grandchildren. As well as frustrating the lives of couples like this, SDLT also frustrates the ambitions of those who might otherwise have bought that same property, precisely because it is larger or conveniently located for employment opportunities. In this way, SDLT plays a role in both exacerbating the housing crisis and weakening productivity.

This research estimates the number of property transactions which would occur if the threshold for stamp duty land tax on residential properties was raised from £125,000 to £1 million. In other words, how many more families could move home if we stopped taxing them.

Click here to read the research paper.

 

Key findings

  • Raising the SDLT threshold from £125,000 to £1 million would result in an estimated 220,000 more transactions over the coming year, equivalent to a 31 per cent increase.

  • Some of this increase would be temporary, but an estimated 135,000 transactions a year would be permanent, equivalent to a 19 per cent increase.

  • The number of additional families who would be freed to move in the first year would be approximately equivalent to the total dwelling stock of Manchester, Liverpool or Bristol.

  • The number of families who would be freed to move each year on an on-going basis (after the temporary effects had expired) would still be approximately equivalent to the total dwelling stock of Nottingham or Doncaster or of Oxford, Cambridge and Melton combined.

  • A £1 million SDLT threshold would result in an estimated 40,000 (or 12 per cent) more transactions over £125,000 but not over £250,000 over the coming year. This number is approximately equivalent in size to total dwelling stock of Hartlepool or Tewkesbury.

  • A £1 million SDLT threshold would result in an estimated 115,000 (or 40 per cent) more transactions over £250,000 but not over £500,000 over the coming year. This number is approximately equivalent in size to the total dwelling stock of Wolverhampton or Plymouth.

  • A £1 million SDLT threshold would result in an estimated 40,000 (or 66 per cent) more transactions over £500,000 but not over £750,000 over the coming year. This number is approximately equivalent in size to the total dwelling stock of East Dorset or Watford.

  • A £1 million SDLT threshold would result in an estimated 20,000 (or 78 per cent) more transactions over £750,000 but not over £1 million over the coming year. This number is approximately equivalent to the total dwelling stock of West Somerset or Christchurch.

  • In the year ending 31 August 2019, 703,965 transactions above £125,000 but not exceeding £1 million were registered. No stamp duty would have been paid on these transactions, and a reduced bill would have been paid on the 21,980 transactions over £1 million.

  • Previous research has shown public opinion strongly supports a £1 million stamp duty threshold, with a 66 per cent approval rate against just 17 per cent in opposition.

Click here to read the research paper.