The evidence says the opposite: it would slash transactions, gum up housing chains, and could even collect less tax overall.
Stamp duty land tax – paid when you buy a property – is a deeply hated tax. Tax something and you get less of it.
More surprising is how big the effect is: figures from the Office for Budget Responsibility (OBR) suggest that stamp duty is deterring about 70,000 house purchases every year.
We also shouldn’t forget the human cost: being unable to move house makes people miserable.
CGT on main homes — making things worse
Currently, CGT is only charged on second homes, rather than the main residence someone lives in.
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Take an example: someone bought an average detached house in 2010 for £250,000; it’s now worth £440,000.
The result would be a collapse in house sales – the OBR SDLT data implies transaction volumes would fall by well over 45,000.
Others allow deferral when you buy a new residence (eg Switzerland, Sweden); and the US exempts the first $250,000 of gain ($500,000 for married couples).
That would be unfair, distortive and – crucially – raise far less than headline figures suggest. It could even lose money.
That drop reduces the CGT revenue Government’s hoping to collect, because fewer people are selling.
These two effects combine, and mean that CGT on high value house sales could actually lose tax revenue. (We’ve calculations demonstrating this on the Tax Policy Associates website.)
A drop in high-value transactions will reduce lower-value transactions, as “chains” propagate the shock to lower price points.
So what’s the answer?
It discourages land hoarding and accelerates build‑and‑sell. Economists across the spectrum support variants of this approach, from the Institute for Fiscal Studies to the Adam Smith Institute to the Resolution Foundation.
We should tax land – because it’s the one thing we won’t get less of when we tax it.
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