38,000 homes could be built every year by abolishing stamp duty, says think tank

• Eliminating stamp duty land tax (SDLT) on primary residences in the UK could allow for 38,000 homes to be built and 349,000 housing sales every year, according to new analysis by the Adam Smith Institute (ASI);
  
  

• It would boost economic activity by nearly £20 billion a year, through increased construction £12.9bn, higher wages £1.2bn due to increased mobility, and greater consumer spending 3.2bn;
  
  

• The total fiscal cost to the Treasury would be £5.1 billion annually, just over half the assumed £9.2 billion cost, once these wider benefits are accounted for;
  
  

• SDLT abolition would increase homeowner mobility by 56%, reversing years of decline in Britain's housing market;
  
  

• The ASI is calling on the Chancellor to abolish stamp duty on primary residences in the forthcoming Budget, or to announce a phased plan for full abolition by 2028.

Abolishing stamp duty on primary residences could unlock the development of 38,000 homes a year and 349,000 housing transactions every year, Adam Smith Institute research reveals. Stamp duty land tax (SDLT) is a tax on the transfer of property, it is widely considered to be one of the most inefficient and unfair taxes in the UK. 

The leader of the opposition, Kemi Badenoch made her first major policy announcement pledging to abolish SDLT on primary residences. It comes as the budget is fast approaching and the government  are on track to miss its new homebuilding target, with just 695,000 housing transactions completed in 2024/25, far below pre-2008 averages, 800,000 transactions. 

ASI analysis shows that abolishing SDLT on owner-occupied homes would increase homeowner mobility by 56 per cent, creating 349,000 additional housing sales per year. This would include 38,000 new homes annually as developers reinvest in new builds. 

SDLT raised 1.3 per cent of total government revenue, £13.9 billion in 2024/25, meaning it delivers little fiscal benefit compared to its economic damage. Abolishing SDLT on primary residences would cost £9.2 billion in static terms, but once dynamic effects such as higher construction, wages and construction spending are included, the true cost falls to just £5.1 billion a year. 

Overall, the reform would increase housebuilding by £12.9 billion annually, increase wages by £2 billion by making it easier to accept higher paying jobs that require relocation, and generate £610 million in extra VAT receipts from household spending on renovation and decoration.

Naturally, SDLT is not the only thing blocking builders in Britain. Our broken planning system makes physical investment uncertain and expensive, requiring case-by-case decision-making for planning permissions. And, other uncompetitive property taxes only exacerbate the problem. 

Scrapping SDLT is a great first step. But to get Britain building, we must enact full-fat planning reform. Short of abolishing the 1947 Town & Country Planning Act, this means removing the Green Belt designation for intensive agricultural land and abolishing development restrictions on Green Belt Land within 10 minutes' walk of a railway station.

James Cleverly, Shadow Secretary of State for Housing, Communities and Local Government and Member of Parliament for Braintree, said

“Stamp Duty is one of the most damaging, un-Conservative taxes in Britain. It traps families, stifles aspiration, and holds back the economy. The Adam Smith Institute's research shows that scrapping it wouldn't just help first-time buyers – it would unlock tens of thousands of new homes, support small businesses, and help build a stronger economy.

Conservatives know that when people move, spend and invest, everyone benefits. Labour's instinct is always to tax more; ours is to back working people, homebuyers, and the local businesses that keep Britain moving.”

Gareth Davies, Conservative Member of Parliament for Grantham and Bourne, said:  

“We all know that Stamp Duty Land Tax clogs up the gears of aspiration. Whether for younger people who wish to achieve the dream of homeownership, families who wish to move elsewhere or to a larger home, or pensioners who wish to downsize, Stamp Duty is a barrier that we need to pull down for good.

The Adam Smith Institute has been making this case loud and clear. I am proud to stand with them in calling for the Government to abolish Stamp Duty on primary residences once and for all.”

Jack Rankin, Conservative Member of Parliament for Windsor and Maidenhead, said:

“Stamp Duty represents the worst of Britain's taxes - it crushes hope for young families, freezes older people into homes they don't want to live in, and blocks new housebuilding for our children and grandchildren.

The findings in this research shows the government that abolishing the tax is affordable, helps deliver their own housebuilding goals, and helps hard-working tradespeople get more business.

As Kemi announced at Conservative Party Conference, we are the Party of sensible, pro-growth economic reforms. I'm very glad the Adam Smith Institute supports us on this tax.”

Mitchell Palmer, Economist at the Adam Smith Institute, said:

“Stamp duty is one of the most inefficient and backwards taxes in Britain. It punishes people moving towards opportunity and locks people in.  

Abolishing it would get Britain moving again, creating hundreds of thousands of extra housing sales and tens of thousands of new homes each year. All for a modest cost to the Treasury.

Ahead of the budget, the chancellor needs to show that the government is serious about tackling the housing crisis and unlocking growth by committing to abolishing stamp duty on primary residences.”

ENDS

Notes to editors: 

To estimate the gross revenue loss from SDLT abolition for primary residences, we estimated the total number of sales affected by abolition, using housing turnover data from the English Housing Survey. Second, we estimated how many additional sales would be enabled using empirical elasticities from the literature, including estimating how many would be from new sales. Third, we transformed these into offsetting revenue gains, by applying standard tax wedges and/or rates to an estimate for increased consumption spending based on the empirical elasticity of consumer durable consumption to housing turnover, estimates for possible increases in earnings, and likely construction spending. These offsetting revenue gains were netted off the gross revenue loss to provide a final forecast net cost figure over the OBR's medium-term forecast period. 

This paper will be available on the Adam Smith Institute website from 10pm, Sunday 2rd November 

OTHER RELEVANT RESEARCH:

https://www.adamsmith.org/press-releases/britians-tax-system-is-blocking-the-builders

https://www.adamsmith.org/research/the-green-noose

Mitchell Palmer is an Economist at the Adam Smith Institute.

The Adam Smith Institute is one of the world's leading think tanks. It was ranked first in the world among independent think tanks and as the best domestic and international economic policy think tank in the UK by the University of Pennsylvania. Independent, non-profit and non-partisan, the Institute is at the forefront of making the case for free markets and a free society, through education, research, publishing, and media outreach.