Suffering from a surfeit of prevaricating economic advisors, Harry Truman once demanded a ‘one-handed economist’ – one that wouldn’t keep saying, ‘on the one hand, on the other hand’. When it comes to stamp duty, he would find many. Economists almost universally agree that stamp duty land tax (SDLT) may be the worst tax in Britain.
The reason is simple. Any transaction tax discourages transactions. In housing, that means fewer moves and worse matches between people and homes. Properties are left in the hands of those who value them less. The ‘property chain’ makes this effect even stronger for housing. Most people only own one house, so to purchase a new home, they must sell their existing property. As a result, even if stamp duty only directly deters one household from moving, it also prevents another household from moving into their now-vacant home, and a third household from moving into the second house, and so on and so forth.
Adam Smith Institute research lays out how abolishing stamp duty could transform our housing markets and economy. Some 349,000 extra homes could be bought and sold per year. That is substantial; only 1 million total home sales occurred in England in the year ending August 2025. But the problem isn’t just frozen housing chains. Stamp duty also drags economic growth in three major ways.
The first – and smallest – is that when people move house, they spend. Households often purchase more consumer durables, like fridges and TVs. They also engage in repairs and repainting as they redecorate and renovate. Stamp duty suppresses the ripple of consumption, cutting VAT receipts as well as household spending.
The second way it holds back growth is much more important. It blocks people from moving to opportunity. Many of the moves enabled by abolishing stamp duty would be workers moving from lower- to higher-productivity areas. Think of a retired couple choosing to sell their London flat to a young family, while moving themselves to the country. Just under 10% of the enabled moves would fall into this ‘moving to opportunity’ category. Within four years of abolition, that’s a quarter of a million additional workers living and earning in higher-productivity regions – and likely paying more in income tax and national insurance.
Such moves could also boost productivity more broadly. Economists call these ‘agglomeration effects’. Workers and firms become more innovative and efficient when they cluster together by being geographically closer to each other. Ideas percolate more easily; start-ups are established more straightforwardly; goods and services move more quickly. The size of these effects would materialise slowly, but over time – as more people take advantage of the newly-lubricated housing market – they could become material.
Finally, scrapping SDLT will supercharge housebuilding. Empirical estimates for the size of this effect are thin on the ground, but we conservatively estimate that 11% of the newly enabled transactions could be for new builds. If this share held, stamp duty abolition could account for 10% of the Government’s target to build 1.5 million homes by 2029. In reality, the effect could be much larger. Builders say that they are currently struggling to offload inventories, which ties up their balance sheet and delays the beginning of new projects. More sales means faster ‘capital recycling’, and more building.
The combined effect of these three growth-enhancing channels is that abolishing stamp duty on primary residences would cost far less than headline figures suggest. In fact, higher VAT, income tax, National Insurance contributions and corporation tax receipts could offset 45% of the revenue loss on average over the parliament. The true net cost would average around £5.1 billion a year – hardly trivial, but far from unaffordable.
In a tight fiscal climate, the real question isn’t whether we should raise money from property, it’s how. Abandoning this uniquely damaging transaction tax and replacing it with a more efficient annual tax would be the smartest alternative. The economic case for shifting the burden from stamp duty to a reformed council tax – levied as a proportion of an up-to-date valuation (ideally of the land alone) – is overwhelming. Such a move would be revenue-neutral, would stop penalising mobility and might even be more progressive.
Truman’s one-handed economist would be clear: stop taxing people for moving and start taxing them for staying put. The benefits in mobility, housing supply, and pure economic dynamism are too large to ignore.
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