Demand to cancel ‘self-defeating’ tax that stops Brits from moving | Personal Finance | Finance

Calls are mounting for ministers to overhaul a key property system amid claims the tax has become one of the biggest barriers to buying and selling a home.

Property experts warn the £12billion-a-year levy of Stamp Duty is trapping growing families in homes that are too small, discouraging older homeowners from downsizing and making it even harder for first-time buyers to get on the property ladder. Critics say the tax, which can add thousands of pounds to the cost of moving, has become “self-defeating” because it discourages the very housing transactions that keep the market moving.

With buyers already battling high house prices, hefty deposits and legal costs, they argue stamp duty has become yet another financial hurdle putting people off moving.

The soon-to-be new Labour leader, Andy Burnham, is under pressure to abolish both stamp duty and council tax in favour of a new property tax that would see home buyers pay an annual charge based on the value of land.

This would see people in London and the south lose out, while the winners would be spread across the rest of the UK. A coalition of mortgage brokers, financial advisers and property experts is urging ministers to rethink the stamp duty system, saying the current thresholds have failed to keep pace with soaring house prices.

Under current rules, buyers in England and Northern Ireland pay Stamp Duty Land Tax on homes worth more than £125,000. Eligible first-time buyers receive relief on the first £300,000 of homes worth up to £500,000.

Many in the industry believe reform is long overdue. While some want stamp duty abolished for owner-occupiers, others favour targeted changes such as higher thresholds or allowing buyers to spread payments over several years.

Rupert Collingwood, founder of The London Broker, said stamp duty should first be abolished for primary residences.

He said: “Stamp duty is a regressive tax that has been abused by successive governments trying to control the property market whilst also attempting to fill the ever-increasing black holes in public spending.

“When each and every government since Thatcher has trumpeted the cause of home ownership, it is ironic that those same governments should at the same time place in the way of home ownership a tax which has to be paid, in cash at the point of transaction, thus limiting the ability of the young, families and downsizers to move up or indeed down the ladder.”

Paul Denley, chief executive of Oakham Wealth Management, told Newspage the levy had become an “economic friction point”.

He said: “Taxing transactions discourages transactions: it is a tax on mobility itself, hitting many first-time buyers, growing families, and downsizers alike. The result is an inefficient housing market where people remain in homes that no longer suit their needs simply because the cost of moving is too high.”

He said total abolition would leave a £12billion hole in the public finances but argued thresholds should better reflect regional house prices, with targeted exemptions for first-time buyers and downsizers.

Jamie Elvin, director at Strive Mortgages, said: “Stamp duty has become a tax on moving home. It discourages growing families from upsizing, older homeowners from downsizing, and workers from relocating, simply because the upfront tax bill is so high.

“Every move that doesn’t happen creates a ripple effect, reducing housing supply and making it harder for first-time buyers to get onto the ladder.”

Other experts argue ministers should focus on making the tax easier to pay rather than scrapping it altogether.

Rohit Kohli, director at The Mortgage Stop, said first-time buyers should be allowed to spread stamp duty payments over five years rather than finding thousands of pounds upfront.

He said a £10,000 stamp duty bill on a £500,000 purchase could instead be paid at around £166 a month, making it easier for buyers to find the cash needed to move.

Not everyone believes cutting the tax is the answer. Darryl Dhoffer, founder of The Mortgage Geezer, warned that abolishing stamp duty for owner-occupiers could simply fuel higher house prices while leaving a multi-billion-pound hole in the Treasury’s finances.

He said: “Stamp duty is a terrible tax, but populist exemptions just line sellers’ pockets.”

The debate comes as affordability remains stretched across much of Britain, with buyers facing elevated mortgage costs despite recent reductions in fixed-rate deals.