Stamp Duty Land Tax

In October 2017 the OBR published semi-elasticity estimates for residential SDLT, derived from HMRC's analysis of the December 2014 reform.⁵ Each gives the percentage change in transactions per 1 percentage point change in the effective tax rate; roughly twice as large as previously assumed:

A semi-elasticity of −6.0 means a 1pp rate cut increases transactions by 6.0%. We use steady-state rather than Year 1 estimates; the latter are larger (up to −7.0 for cheaper properties) because retiming inflates the short-run response.

Every transaction suppressed by SDLT is a mutually beneficial exchange that does not occur. The welfare cost per suppressed transaction averages half the SDLT that would have been paid; the standard Harberger triangle.⁶ Because deadweight loss scales with the square of the effective rate, high-rate bands are disproportionately damaging per pound of revenue raised.

Our model overstates raw revenue because it applies the standard schedule to all buyers, ignoring first-time buyer relief. Revenue and DWL figures below are scaled proportionally so that total revenue matches HMRC's published £6.7bn standard-rate benchmark.

We apply the OBR's steady-state semi-elasticities to Land Registry transaction volumes for England. Both scenarios leave surcharges unchanged; the revenue effects relate only to the standard buyer schedule.

Annual transaction counts are from HM Land Registry Price Paid data for calendar year 2025, English sales only (809,910 transactions; Welsh postcodes excluded).

Predicted responses range from zero (properties below the nil-rate band) to over 50% at the top; figures above £2m extrapolate well beyond the original data and should be treated as indicative.

A nil-rate band to £250,000 and flat 5% above eliminates SDLT for buyers under £250k and delivers large reductions above £925k where the 10% and 12% bands are removed. This targets the most distortionary rates while retaining a broad revenue base.

An estimated 21% of additional transactions are long-distance (50+ km) moves by economically active households, who gain approximately 9% in earnings from improved job matching.⁷ Applied to our transaction model, this gives 15,255 long-distance movers per year under full abolition.

Most moves are short-distance and driven by household needs; the 21% long-distance share comes from English Housing Survey microdata.⁷ We apply it uniformly, though it may be higher for expensive properties where job relocation is more common.

The standard approach applies the 9% gain to flat average earnings of £38,717, producing ~0.002% of GDP per year.⁷ But the largest SDLT reductions fall on expensive properties whose buyers earn well above the average; using band-specific earnings produces a materially larger estimate.⁸

Each additional transaction generates spending on estate agents, solicitors, surveyors, removal firms, and mortgage brokers. Agent fees (1.2% of sale price) scale with property value; other costs (conveyancing, survey, removals, mortgage, searches) are modelled as a flat £6,000 per transaction, mostly VAT-able at 20%.

Agent fees dominate at higher price bands; ancillary costs dominate at lower bands.

Limitations

• Extrapolation. The semi-elasticities were estimated from the 2014 reform, which changed effective rates by 0–3pp. Full abolition implies reductions exceeding 10pp at the top of the market (effective rates approach the 12% top marginal rate); the predicted 50%+ transaction increase for the most expensive properties extrapolates well beyond the original data.
• Linearity. Semi-elasticities are local linear approximations. For large rate changes the true response is unknown; it may diminish (fewer locked-in transactions to unlock) or increase (credit constraints relaxed at lower rates).
• First-time buyer relief. FTBs below £500k benefit from a £300k nil-rate band. Revenue figures are scaled to HMRC's published £6.7bn benchmark accordingly.
• Price capitalisation. The OBR estimates price semi-elasticities of −1.5 to −2.0: a 1pp rate cut raises prices by 1.5–2.0%. Part of the buyer's saving is captured by sellers; a transfer, not an efficiency loss, but buyers do not retain the full benefit.
• Three-band resolution. The OBR provides only three semi-elasticity bands. The same value (−6.0) applies to a £1.1m house and a £10m property, which almost certainly have different buyer behaviour.
• Credit constraints. SDLT reduces deposit funds for marginal buyers near LTV limits. Abolition could unlock currently unaffordable purchases; a channel not captured by the semi-elasticities.
• Selection. The 9% earnings gain is an average for long-distance movers. Marginal movers; those just deterred by SDLT; may gain less from relocation, overstating the productivity channel.

Wider economic effects

A full cost-benefit analysis would also account for distributional consequences of replacement revenue, house price capitalisation,⁷ and dynamic fiscal offsets from higher transaction volumes (additional VAT, capital gains tax, and professional fees).