But while planning reforms and investment often dominate the debate, another factor may be quietly restricting the market’s ability to expand: Stamp Duty Land Tax (SDLT).

With SDLT thresholds largely unchanged despite years of house price inflation, more buyers are paying significantly higher tax bills simply because property values have increased. This phenomenon, often referred to as “fiscal drag”, raises an important question: is the tax system now working against the Government’s housing ambitions?

How frozen thresholds are increasing the tax burden

Over the past decade, UK house prices have risen steadily, but SDLT thresholds have remained largely fixed. As a result, a greater proportion of many property purchases now falls into higher tax bands, increasing the amount buyers pay when moving home.

Mark Cunningham, Partner, said:

The Government’s ambition to deliver 1.5 million new homes during this Parliament recognises the importance of housing to economic growth and prosperity, but frozen thresholds have slowly dragged more of each transaction into higher tax bands. The average UK house price has risen by around 28% over the past decade, but the SDLT bill on a purchase at the average property price has risen by more than 100%

While temporary SDLT holidays have provided short-term relief in recent years, the underlying structure of the tax has changed very little. As property prices have continued to rise, buyers have gradually been exposed to higher rates of SDLT without any formal increase in tax rates.

Why this matters beyond homebuyers

As SDLT fiscal drag is making it more expensive for people to move and therefore constricting the market’s ability to grow, policymakers should ask whether the tax system is working against their own housing ambitions. A successful property and construction market requires both confidence and mobility to enable transactions. Builders will only build if there are enough buyers to make their development projects profitable.

A slower housing market can have broader economic consequences. Developers may delay or reduce new projects if buyer demand softens, while businesses connected to housing – including construction firms, estate agents, surveyors, lenders and legal advisers can all experience reduced activity.

The wider economic implications

A higher tax charge per transaction may look attractive in the short term, but if it suppresses activity, investment and mobility, it risks undermining the very market on which future tax revenues and housebuilding targets depend.

This highlights a wider policy challenge. Tax systems that remain static while asset values increase can unintentionally discourage the behaviour they are intended to support, in this case, people moving home and developers bringing forward new housing.

The growing impact of fiscal drag

While there have been temporary SDLT holidays over the last decade, the underlying structure of the tax has remained largely unchanged. As house prices have risen, larger parts of residential transactions have been pulled into higher rates of tax.

The average UK property price increased from approximately £211,230 in May 2016 to approximately £271,295 in May 2026, an increase of around 28.4%. Over the same period, SDLT payable on a purchase at the average property price increased from £1,725 to £3,565, an increase of 106.7%.

Because SDLT is based on fixed price thresholds, even moderate house price growth can produce disproportionately higher tax bills.

As SDLT is charged by reference to fixed monetary thresholds, house price growth has a disproportionate effect. A property that would once have sat largely within the lower SDLT bands is now exposed to more tax at higher rates.

If SDLT thresholds had increased in line with average house price growth since 2016 they would look very different today. The nil rate threshold would be approximately £160,500 rather than £125,000. The £250,000 threshold would sit just above £321,000 and the £925,000 threshold would move to almost £1.2 million.

The difference may appear modest at lower property values, but it becomes increasingly significant as prices rise. A purchaser of a £1 million property is paying almost £6,600 more SDLT than would be the case if thresholds had simply moved in line with average house prices. At £2 million, the difference exceeds £24,500.

Looking beyond the headlines

Housing market performance is influenced by many factors, including mortgage affordability, interest rates, planning policy and consumer confidence. SDLT is only one part of that picture, but it remains a significant cost that directly affects decisions to buy, sell or relocate.

As the Government seeks to accelerate housebuilding and stimulate economic growth, the interaction between tax policy and housing market activity is likely to remain under scrutiny.

Mark concluded:

Over the last decade, the SDLT payable on the average property has more than doubled, while residential transactions in England and Northern Ireland are lower than they were ten years ago. The data does not prove SDLT alone is responsible. The period has been distorted by Covid, temporary SDLT holidays, higher mortgage rates and wider affordability pressures. However, the direction of travel is difficult to ignore. A tax on movement has become more expensive and the market is not transacting at higher volumes

What should you consider next?

Whether you are an individual buyer, property investor or business operating in the property sector, it is worth considering:

Review the full cost of property transactions, including SDLT, as part of any acquisition or relocation decision.

Monitor potential policy changes, particularly ahead of future fiscal events, as SDLT reform could become part of wider housing policy discussions.

Assess the commercial impact of reduced market activity if your business depends on residential property transactions.

Seek professional advice early when planning significant property purchases or developments to understand available reliefs, tax implications and structuring options.

Take a long-term view, recognising that tax policy, interest rates and housing supply will continue to shape market conditions over the coming years.

Would you like to know more?

If you have any questions about the above, please get it touch with your usual Blick Rothenberg contact or Mark using the form below.