- The TaxPayers’ Alliance’s (TPA) dynamic tax model shows that stamp duty land tax (SDLT) depresses growth, chokes off investment and even holds down wages
- Were stamp duty abolished, by 2029 GDP would be £27 billion higher, investment up by £7 billion and average weekly earnings £6 greater
- Cutting stamp duty must feature in a pro-growth mini-Budget
For immediate release
Reports this morning suggest that the government is considering cutting stamp duty at Friday’s ‘mini-Budget’. Rapid analysis by the TPA - using its dynamic tax model - shows that stamp duty in its current form depresses economic growth, investment and even wages.
The campaign group recommends raising the stamp duty threshold to £1 million, with a view to abolition in the long term. Recent research by the TPA found that 245,000 additional housing transactions could be unlocked if the threshold had been raised to £1 million in 2019-20.
Key findings from the TPA’s dynamic tax model:
- If stamp duty - and Scottish equivalents - were not in place, by 2029 GDP would be £27 billion higher, investment up by £7 billion and average weekly earnings £6 greater.
- Compared to the baseline scenario, investment spending would be 2.29 per cent higher were stamp duty not in place and GDP would be 0.85 per cent higher by 2029.
- Baseline scenario means what the economy is expected to look like if tax changes were not implemented.
John O’Connell, chief executive of the TaxPayers' Alliance, said:
"Stamp duty is a highly destructive tax, harming economic growth by impacting decisions like downsizing or moving for a new job.
“Cutting stamp duty must be part of a menu of measures at Friday’s mini-Budget to help get the economy moving and ease the pressure on taxpayers struggling with the cost of living.
“Increasing stamp duty so that only millionaires need pay would mean plenty of people living in houses that are too big or too small can move, and workers can relocate to new jobs more easily.”
Why does stamp duty depress growth and investment?
- SDLT functions like many other transaction taxes in that it impedes the effective allocation of capital, which in turn affects investment decisions. Stamp duty is paid on both residential and commercial properties.
- For residential transactions, SDLT significantly adds to the already expensive cost of moving home. The costs therefore may outweigh the benefits to potential homebuyers, meaning they stay put.
- That leads to an inefficient allocation of resources. For instance, older homeowners may be put off from downsizing, meaning that they occupy much more space than needed. Consequently, growing families may be in properties that are too small.
- SDLT can also impact employment opportunities. High costs may put off prospective employees from applying, and moving, for a job that matches their skill set.
- Former chancellor Rt Hon Rishi Sunak MP lifted the SDLT threshold to £500,000 in the summer of 2020 – the height of the covid-19 pandemic. The nil rate band of £125,000 for residential properties was then re-introduced in October 2021.
- TPA analysis found that lifting the threshold to £1 million in the previous year would have unlocked up to 245,000 additional housing transactions.
- For commercial transactions, high rates of SDLT are likely to impact the decision of a business to move to a new property, with knock-on impacts such as investing in new machinery.
TPA spokesmen are available for live and pre-recorded broadcast interviews via 07795 084 113 (no texts)
Grassroots Campaign Manager, TaxPayers' Alliance
24-hour media hotline: 07795 084 113 (no texts)
Notes to editors:
Founded in 2004 by Matthew Elliott and Andrew Allum, the TaxPayers' Alliance (TPA) campaigns to reform taxes and public services, cut waste and speak up for British taxpayers. Find out more at www.taxpayersalliance.com.
TaxPayers' Alliance's advisory council.
- The dynamic tax model, which looks at the impact of tax changes on growth, wages, and investments, was produced by economics consultancy Europe Economics for the TaxPayers’ Alliance.