September 28, 2025

The Proposed Abolition of Stamp Duty — What Could Replace It, and What It Means for You

In recent months, there has been growing discussion in Westminster about scrapping Stamp Duty Land Tax (SDLT) for most home purchases, and replacing it with a new form of property tax.

Because this is still in the planning stage, no final decisions have been taken — but the proposals give us a useful view of how the system might change, and what it might mean for buyers and sellers across different price bands.

Below, we explain:

How Stamp Duty works now
What the proposed replacement might look like
How different property value bands might be affected
Possible benefits, risks and considerations

1. How Stamp Duty Works Today (Brief Summary)

Currently, when you buy a residential property in England or Northern Ireland, you pay SDLT. The amount you pay depends on price bands and whether you are a first-time buyer. For example:

No SDLT is payable on the first £125,000 (standard rate) (or higher threshold for first-time buyers).
Above that, you pay incremental rates on the portions of the price that fall into higher bands — for instance, 5 % on the portion between certain thresholds, and higher rates for more expensive properties.
For very high-value properties, rates can climb steeply.

This one-off tax is paid by the buyer at the time of purchase (or within 14 days of completion).

Stamp duty raises significant revenue — in the past year, SDLT on residential property contributed around £11.6 billion to government coffers.

2. The Proposed Replacement: A National “Proportional Property Tax” or Sale Levy

Many of the current proposals under consideration involve replacing SDLT with a national property tax, sometimes called a proportional property tax, or a levy on home sales.

Here’s how the proposals typically work:

The tax would likely apply when a property is sold, rather than when it is purchased.
It might only apply above a threshold value — many reports suggest £500,000 as a possible cut-off.
If implemented, the rate could be a proportion of the sale value (for example, a fraction of a percent) rather than the stepped bands that SDLT uses.
There is discussion that, in the medium term, this new national tax could be complemented (or evolve) into a local property tax replacing council tax in due course.
Some proposals also model different rates above higher bands (for example over £1 million) or introduce steeper proportional rates for more expensive homes.

Because many details are still being modelled, different proposals show different rate structures. One such model (from tax policy commentators) suggests something like:

Below £500,000: possibly no new tax (i.e. the replacement might only kick in above that threshold)
Between £500,000 and £1,000,000: a levy of 0.54%
Above £1,000,000: a higher rate, e.g. 0.81% applied to the portion above that threshold

Again, these are illustrative numbers from commentators, not official government rates yet.

3. What It Could Mean for Different Property Price Bands

Let’s consider how these proposals might affect properties in different price ranges, under a hypothetical proportional tax regime:

Below £500,000

It is possible that no new levy would apply under many of the proposals. That means properties under £500,000 may continue to avoid the new sale tax altogether.
This could be very beneficial to many mid-market buyers and sellers, reducing the cost of moving, and removing a barrier to mobility in this price range.
For those already paying SDLT today, this change could be a saving — though whether that happens depends on transitional rules set by government.

Between £500,000 and £1,000,000

Under many proposals, this is the “sweet spot” where the new levy would begin to apply.
The homeowner selling in this band might pay a proportional rate (for example, 0.54 %) on the sale value (or on the portion above the threshold, or on the whole sale, depending on design).
Because this new tax is proportional, there would be no stepped bands as in current SDLT; it would be simpler and more linear.
Sellers in this range would need to compare whether the new levy is lower or higher than what SDLT under the old system might have cost.

Above £1,000,000

For very high-value properties, the proposals often call for a higher proportional rate for any value above £1 million (or even above that).
For example, a model suggests a rate of 0.81% for the portion above £1 million.
If that is the case, a seller of a multimillion-pound property could face a greater tax than in the current system (depending on how the old SDLT bands compare).
However, the total liability may still be more predictable (without tax cliffs) under a proportional system.

4. Possible Benefits and Risks: What Vendors Should Know

Potential Benefits

Greater fairness and predictability
Proportional tax avoids sharp “jumps” in tax liability when crossing a band. Sellers know the percentage rate ahead of sale, making cost forecasting easier.
Lower costs for mid-market transactions
If the threshold is set high (e.g. £500,000), many everyday property sales may pay little or no tax, reducing the friction to move home.
Increased market fluidity
Removing a punitive “once-only” tax could encourage more buying and selling activity—people might move more freely.
Stable revenue for government
Because SDLT revenues fluctuate with property market cycles, a proportional levy may provide a more consistent, predictable income stream.
Simplicity in structure
A single-rate or limited-rate proportional tax is easier to understand and administer than the current multi-band SDLT system.

Potential Risks and Considerations

Higher burden on high-value homes and sellers
In many proposals, luxury properties may face steeper proportional rates, which could be viewed as penalising downsizers or long-term homeowners.
Transitional fairness for those who already paid SDLT
Sellers who bought under the old SDLT regime may feel it is unfair to pay again under a new levy. Transitional reliefs may be necessary to avoid double taxation.
Impact on incentives to move
If sellers know they will face a tax on sale, some might choose not to move, particularly among older homeowners or in high-value areas. This could slow housing turnover in the upper segments.
Regional inequality and concentration of burden
Because many high-value properties are concentrated in London and the Southeast, those regions might disproportionately shoulder the new tax burden.
Political risk and implementation challenges
Any change of this scale requires careful drafting, public acceptance, and likely a phased rollout. Mistakes in thresholds or rates could lead to distortion or adverse effects.

What This Means for Bates & Co Vendors

For clients of Bates & Co, here’s how the potential changes could play out:

If your property is under £500,000, you might benefit from little or no sale-tax liability in the new system (depending on final design).
If your property is in the £500,000 to £1 million band, you'll want to check whether the new proportional rate is more favourable or less favourable than what SDLT would have been under today’s rules.
For luxury homes, the higher proportional rates may mean higher tax costs — but at least they will be more transparent and predictable.
In considering whether to sell now or wait, you’ll want to monitor how the reforms are implemented and whether transitional reliefs are put in place.

Current Status & What to Watch

As of now, the proposals are under review. No final decisions or legislation have been passed.
The Treasury is widely reported to be modelling a new national property tax applied to homes sold above £500,000.
There is also talk of a longer-term evolution toward local property taxes replacing council tax, creating a unified property taxation framework.
Watch for government announcements in upcoming budgets — this is considered a significant fiscal reform, and timing will matter.

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