The UK’s property tax system is both inefficient and unfair. There is consensus among all political parties that something needs to be done. On the efficiency side, stamp duty is the main culprit: as a lump sum tax on property wealth paid at point of purchase, it discourages people to move as frequently as they should. It prevents people from realising their full economic potential by finding the right job, in the right area, or moving into a home suitable for their household size.
In combination with high interest rates and sluggish growth, tax is contributing to UK property transactions reaching near record lows. Meanwhile, over a third of English households live in homes defined by the government as “under-occupied”, with two or more spare bedrooms; 90% of these are homeowners. Reforming stamp duty to free up some of these under-occupied properties – mainly concentrated in the baby-boomer generation now hitting retirement – could enhance growth, productivity and, potentially, the affordability crisis.
