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The Treasury is exploring a fundamental change to how we tax homes: scrapping buyer‑paid Stamp Duty Land Tax (SDLT) on owner‑occupied purchases and replacing it with either a seller levy (kicking in from £500k) and/or an annual property charge on homes valued above £500k. Nothing is final, but this is now an active policy track.
Is the market “broken” because of SDLT?
Activity is soft but not broken. Our high‑value transaction analysis (England & NI, transaction volumes for £1m+) — including CPI/HPI‑adjusted series back to 2009–10, shows nominal volumes peaking post‑pandemic, then cooling with higher rates, and stabilising more recently (HMRC). That fits the broader receipts picture: SDLT receipts fell notably in 2023–24 versus 2022–23 as transactions slowed — underscoring why the Treasury is reassessing the base.
Interpretation: removing buyer SDLT would reduce an upfront cash friction; whether overall liquidity improves depends on the design of what replaces it.
CPI = Consumer Price Index
HPI = House Price Inflation
Where SDLT really bites
With the current main‑residence bands (0% to £125k, 2% to £250k, 5% to £925k, 10% to £1.5m, 12% above), the cheques become material exactly where many family homes transact, especially in London and the South East.
Worked examples (10% deposit)
Assumptions: standard main‑residence SDLT (no surcharge), deposit fixed at 10%.
High‑value transactions — nominal vs CPI & HPI (2009 base)
Source: HMRC
What’s reportedly on the table
- Seller levy from £500k (owner‑occupiers). Would shift payment to the point of sale and move liability from buyer to seller. Early briefings suggest investors/second homes could remain under SDLT.
- Annual levy over £500k (longer‑term option). A proportional property tax that could part‑replace council tax and/or SDLT to create steadier revenue.
Would these ideas make the market more fluid?
Buyer friction reduces if SDLT is removed at purchase.
But new frictions can appear:
- Seller levy (cliff at £500k): risks price bunching just below the threshold and could deter discretionary moves unless the rate is tapered.
- Annual levy: improves mobility only if it replaces, rather than layers on top of, existing charges. Without deferral/roll‑up options, it bites cash‑poor/asset‑rich households and becomes an ongoing affordability line in mortgage assessments.
Bottom line: in its current briefed form, the package reads more like a revenue boosting opportunity for the treasury than a pure liquidity reform. Liquidity can still improve, but only with careful design.
What the treasury hopefully implement in reform
- Avoid hard cliffs (e.g., at £500k). Use a taper or continuous formula to prevent bunching.
- Transitional credits so recent buyers who paid SDLT aren’t double‑charged if a seller/annual levy arrives.
- Deferral/roll‑up for the annual levy to protect asset‑rich, cash‑poor owners (settled at sale or death).
- Scope clarity early to prevent delay in transactions.
If you would like to discuss your mortgage options with a qualified professional, you can speak to one of our mortgage advisors on 0800 980 8777, by emailing us at info@privatefinance.co.uk
Disclaimer: This note is for information only and does not constitute tax advice. Always seek professional advice specific to your circumstances. The views and opinions expressed in this content are those of the author and do not constitute financial, legal, or professional advice, nor should they be interpreted as a recommendation. They do not necessarily reflect the official views, policies, or positions of Private Finance, and are not intended to represent broader market or industry perspectives.
