"On an entirely selfish level, most of us would likely welcome the removal of SDLT returns and calculations from our desks - but Badenoch’s proposals wouldn’t eliminate that burden entirely"
- Emma Sear - Wedlake Bell
With just over a month to go before Rachel Reeves delivers her first Budget, Kemi Badenoch has grabbed the headlines with a crowd-pleasing election pledge: to abolish Stamp Duty Land Tax (SDLT) on main residences for UK residents.
While the Conservatives have yet to explain how such a significant tax giveaway would be funded within their broader tax proposals framework, what would the abolition of SDLT mean in practice?
Impact on homebuyers
For homebuyers across the country, particularly in London and the Southeast, the prospect of scrapping SDLT is likely to be music to their ears. Removing this upfront cost would mean substantial savings, improving affordability and expanding their options in terms of what and where to buy.
On the surface, this is good news for first-time buyers and upsizers alike, and would, no doubt, lead to an increase in transaction volumes. But who would really benefit? It is estimated that between 50 – 60% of all SDLT paid is currently paid by buyers in London and the Southeast and that 2 in 5 first-time buyers pay SDLT. So only 2 in 5 first-time buyers will get savings, and the vast majority of savings made will be in London and the Southeast.
Badenoch argues that higher transaction volumes enhance mobility. Those previously deterred from relocating for work or lifestyle reasons due to SDLT costs might now reconsider. Downsizers, too, could be incentivised to move, freeing up larger homes for growing families.
Badenoch points out that increased market activity would stimulate the wider economy – benefiting removal firms, estate agents, mortgage lenders, tradespeople, furnishing retailers, and more.
Potential risks to the housing market
Greater transaction volumes can also drive up prices. A permanent SDLT abolition might not trigger the same frenetic activity seen during the pandemic-era SDLT holidays, when buyers raced to complete before deadlines and conveyancers worked around the clock. Nevertheless, abolition would be expected to stimulate activity and, if supply fails to keep pace with demand, house prices would inevitably rise.
SDLT, when in place, acts as a brake on excessive market churn. Without it, buyers may feel freer to 'try out' areas and move more frequently. Could this encourage short-term speculation, even in the owner-occupier market?
The system could begin to favour frequent movers and wealthier buyers, undermining long-term ownership and community cohesion as well as widening inequality in the market.
Impact on property investors
Investors would also be affected. Under Badenoch’s proposals, they would not benefit from the proposed SDLT savings, giving main-residence buyers a clear advantage.
This might prompt investors to delay purchases or shift focus to properties held in existing corporate structures or HMOs, reassessing yields in light of rising costs and tax exposure.
Reduced investor activity or a pivot to HMOs could shrink the pool of available rental properties, increasing competition for remaining stock.
While first-time buyers might initially think they need to save less, rising prices and tighter rental markets could make saving harder, leaving them no better off.
Would abolishing SDLT on main residences disproportionately benefit wealthier buyers in high-value areas? Critics argue that such a policy could entrench regional inequality and do little to help those most in need of support to get on the housing ladder.
Legislative and practical implications
Abolishing SDLT would require primary legislation, something that takes time. It’s also unclear whether devolved governments would follow suit. If they didn't, it would create disparity between the nations and impact mobility between them.
HMRC systems and SDLT-related processes would need to be rewritten, with updated guidance and software to accommodate ongoing SDLT obligations for non-UK residents, second-home buyers, and corporate purchasers.
From a conveyancer’s perspective, we’re no strangers to SDLT changes. We’ve weathered SDLT holidays and the occasional midnight rate change.
On an entirely selfish level, most of us would likely welcome the removal of SDLT returns and calculations from our desks - but Badenoch’s proposals wouldn’t eliminate that burden entirely.
Ultimately, whether this proposal becomes policy will depend on the outcome of the next general election. But it has already sparked debate about the role of SDLT in the housing market - and whether reform, rather than abolition, might be a more balanced approach.
