Contemplating significant adjustments to stamp duty payments structure in a reformation of the property market, as proposed by Rachel Reeves
The Chancellor of the Exchequer is considering significant reforms in the upcoming Budget, which could have a significant impact on home buyers, pension savers, and taxpayers.
One of the proposed changes is the reform of the stamp duty system, allowing home buyers to pay their stamp duty bill over several years instead of as a lump sum. This reform, if implemented, could motivate more people to move house, particularly in areas with high home values and a significant burden on home buyers. Industry groups like Rightmove and Zoopla have backed a campaign for this change, which could help unlock more home moves.
However, experts have warned that these changes could spark a political and economic backlash. Some fear that staggering the payments of stamp duty could cause market turbulence, while others caution that reforms could raise less than expected or break manifesto promises. Steve Webb, a former Pensions Minister, has expressed concern that these changes could put additional burdens on employers.
In addition to stamp duty reform, the Chancellor is also considering changes to pension tax relief. Currently, basic-rate taxpayers receive a 20% top up on pension contributions, while higher-rate taxpayers receive 40% and top earners 45%. One proposal is to replace higher-rate tax relief with a flat rate of 20%. Another proposal is to cap or abolish the tax-free lump sum allowance in pensions.
Abolishing salary sacrifice could also be on the table, which could impact over three million basic-rate taxpayers. Salary sacrifice schemes allow employees to agree to a lower salary in return for the company paying that amount into their pension.
The Chancellor is also considering adjustments to the fees tax. Proposed changes include an increase in the basic flat rate for income tax purposes from €320,000 in 2025 to €420,000 in 2026, an increase in the profit exemption threshold from €33,000 to €50,000 starting 2027, evaluation and possible adjustment of depreciation periods, facilitation of business transfers by raising the tax-free allowance for business disposals from €7,300 to €45,000, removal of the professional ban for applying the half tax rate, and a gradual increase of the luxury ceiling to €65,000 by 2027, all subject to budget approval.
The Treasury has stated that the Chancellor makes tax policy decisions at fiscal events and does not comment on speculation around future changes to tax policy. The proposal for stamp duty reform is under discussion, and technical details could be fleshed out in talks with Office for Budget Responsibility analysts.
Reducing the barriers to people moving home is important for economic growth and to support more home building, according to Richard Donnell, executive director at Zoopla. The Chancellor's proposed reforms aim to achieve this goal, but the impact on the economy and taxpayers remains to be seen.
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