How Extending the Stamp Duty Holiday Could Boost the UK Mortgage Market. The UK mortgage market would benefit significantly if the government extends or permanently adopts the Stamp Duty Land Tax (SDLT) holiday. New findings from Kensington Mortgages indicate that maintaining the £500,000 stamp duty threshold could drive a sharp increase in property transactions and household spending, ultimately benefiting the wider economy.
SDLT Relief Could Fuel Growth and Tax Revenues
Extending the SDLT holiday could generate between £2.3 billion and £4.1 billion in economic impact, according to a study by the Centre for Economics and Business Research (CEBR). While tax breaks are often seen as a drain on public finances, this policy bucks the trend by increasing transaction volumes, raising house prices, and boosting consumer confidence.
Notably, higher property activity could generate a fiscal surplus of up to £139 million, challenging the notion that stamp duty relief reduces tax receipts.
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Lowering the Threshold? More Revenue, Not Less
Interestingly, even a reduced SDLT threshold could yield higher tax income. The analysis found:
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A £450,000 threshold might result in £247 million in extra revenue
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A £300,000 threshold could create an annual surplus of £491 million
These findings suggest that strategic adjustments, rather than the full removal of stamp duty incentives, could support both the property market and Treasury objectives.
A Policy That Drives Market Confidence
Since its introduction in July 2020, the SDLT holiday has applied to properties priced at £500,000 or less, covering nearly 90% of residential transactions in England and Northern Ireland. Originally set to expire on 31 March 2021, the initiative is facing mounting pressure to be extended due to its proven impact on market confidence.
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Mark Arnold, CEO of Kensington Mortgages, comments:
“This research shows the stamp duty holiday’s positive impact on the economy during a crucial time. The threshold level appears ready for permanent reform. Upper-bound estimates suggest the Treasury could benefit financially while boosting the economy. It might unlock housing market activity and fund 4,000 additional nurses simultaneously.
Furthermore, updating the threshold to reflect real-world house prices could solve structural issues in the UK housing market. Maintaining the £500,000 threshold could enhance regional mobility with trickle-down benefits. It could also drive downsizing, free up family homes, and address the stock shortage. Now is the time to be bold. We should keep the threshold or consider raising it above £125,000.
The findings show that extending the current SDLT, LBTT, and LTT holidays could cost the UK Treasury £3.9 billion annually. However, the table below summarises the potential recovery at £2.3bn-£4.1bn.
In conclusion, the stamp duty holiday has proven beneficial. Reforming the threshold could continue to drive economic growth and address housing market issues. The potential fiscal benefits should encourage policymakers to consider permanent changes.”
Stamp Duty Reform: How Lower SDLT Can Supercharge Property Wealth and UK Consumption
Reducing stamp duty isn’t just a tax tweak, it’s an economic catalyst. According to forecasts from the Centre for Economics and Business Research (CEBR), cutting Stamp Duty Land Tax (SDLT) could unlock 37,000 additional property transactions every year. This surge in activity is estimated to boost annual revenue by £266 million, reflecting how lower transaction costs can reinvigorate the UK property market.
Projected Impact on House Prices and Property Wealth
With increased buyer activity comes a natural rise in demand and with it, house prices. Projections suggest average house prices could climb by 1.3%, with high-value homes seeing even sharper growth. Because SDLT is progressive, the impact is most pronounced in higher property bands, potentially resulting in a 1.9% increase in households’ collective property wealth.
This spike in values could also increase government revenue through higher receipts from SDLT, Land and Buildings Transaction Tax (LBTT), and Land Transaction Tax (LTT), totalling an additional £256 million annually.
Fiscal Upside for the Treasury
The Treasury stands to gain significantly. The combined effect of more transactions and rising property values could deliver £523 million in additional yearly revenue. Given that a large share of UK household wealth is property-based, even minor changes in pricing can have far-reaching effects. Rising property equity doesn’t just sit still; it fuels broader consumer behaviour and financial confidence.
Economic Ripple Effect: Driving Household Consumption
A rise in property wealth is more than a feel-good statistic. The CEBR analysis suggests a £113 billion uplift in households’ net worth could result from house price inflation. This wealth effect could translate into a 0.36% to 0.75% increase in household consumption, as homeowners feel more financially secure and willing to spend—benefiting sectors across the economy.
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Capital Gains Tax and the Expanding Property Wealth Landscape
Looking beyond primary residences, the impact on capital gains tax (CGT) is equally notable. In 2017–2018, residential property transactions subject to CGT were valued at £26.6 billion, per HMRC. With a 1.9% rise in overall property wealth, CGT-eligible activity could expand by an estimated £505 million annually.
This trend reflects a growing fiscal footprint in the CGT space, underscoring how rising asset values are not only reshaping household wealth but also increasing revenue from property investments and disposals.
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