Stamp duty is holding normal people back - not just millionaires with pool houses, says HELEN CRANE: Here's how I'd change it

Are you a fan of riddles? If so, try this one on for size.Q: When is a house not a house?A: When it is a pool house – now pay your stamp duty.That was the outcome of a case in front of the first-tier tax tribunal this week.The owner of a £2.6million mansion in Kent argued that the pool house in his grounds could be used as a standalone home by someone else, making him eligible to pay less in stamp duty land tax under obscure rules which have since been altered.Had he persuaded the judge of the same, it would have seen his tax bill reduced to £220,500 rather than the £301,250 he paid, a difference of £80,750.HM Revenue & Customs disagreed that it was possible to live in the single-storey wooden annexe, however.During the case, the judge was forced to consider such profound questions as, could people sleep in the pool house? Could they go to the toilet there? Did it have a wash basin?Granted, it this is not a situation many people will find themselves in - but it shows the extraordinary lengths people will go to to try and pay less of this hated tax. Ripe for reform: Stamp duty stops people moving home, as it is a large, one-off cost - sometimes in the tens of thousands of poundsWhen people are claiming a stranger could live in their garden to avoid paying stamp duty, it shows it's ripe for a major rethink - a policy Kemi Badenoch reiterated in her speech at the Conservative party conference this week.For those not on a pool-house budget, the answer to not wanting to pay as much stamp duty isn’t to pay it and then argue with HMRC later, like the Kent homeowner did. The answer is simply not to move at all.The housing market is in the doldrums. Prices went up by just £50 in September, according to Lloyds figures out this week – and have barely moved in the last year.It’s partly down to mortgage rates, which have spiked again in recent weeks. But according to Knight Frank’s Tom Bill, another factor is that homeowners are terrified about being heaped with more property-related taxes.Their fear is perfectly logical, as property levies have been up and down like a yo-yo since the pandemic. With another Budget approaching, you can see why they are holding off. Policy: Kemi Badenoch reiterated her pledge to scrap stamp duty at the Conservative party conference this week - but can we afford to get rid of it altogether?Axing stamp duty permanently, which Badenoch advocated for alongside her plan to scrap inheritance tax on people's main homes, would undoubtedly inject some life back into the market.Just look at what happened during the temporary hiatuses between 2020 and 2024, when home sales were off the charts.But I fear it will never happen. The country is in dire need of cash, and homebuyers paid £15.2billion in stamp duty in 2025 – despite it hardly being a vintage year for the property market.There's much to be said for the wider economic benefits of people moving home freely and not being hampered by taxes, such as being able to relocate for new jobs, and spending money with movers, decorators and furniture sellers. However, these can't be as neatly expressed on a Treasury ledger.I think a more practical approach would be to tax property purchases in a way that doesn’t require all the money upfront. That's what really gums up the market.Andy Burnham has talked about an annual property tax in the distant past, although his idea involves tying it in with a new replacement for council tax which sounds fiendishly complicated.Simply making stamp duty a yearly payment would be a better approach in my opinion, as the last thing we need is to make things more confusing (and no doubt create fresh loopholes in the process).In its current form, the tax is such a blunt instrument that is stopping people from moving on with their lives. A couple I know in their early thirties have just had their first baby, and are eyeing an escape from London to the suburbs. They skipped buying a flat so are still renting, and want to move straight into a three-bedroom house as their first home.They’re both in good jobs and can afford the mortgage payments. They’ve saved a big enough deposit. All that's stopping them is stamp duty - which would amount to an eye-watering £25,000.So instead of buying a home, they're stuck in their rented flat. And the Government gets no stamp duty at all.This is why I think making stamp duty an annual payment makes a lot of sense.It's not a perfect system, but at least it wouldn’t be massively stacked in the favour of people who buy a home and never move, as the current regime is.Many homeowners can budget for a bit extra every month – but they can’t magic £25,000 out of thin air.It’s arguably fair to tax those who are in the position to buy a home, especially a higher-value one.But it’s not fair to heap such a whacking great sum on them all in one go, that it stops them buying altogether.Protect Your Money – sign-up to our six-week plan The Budget is coming – but are you prepared? Sign up to our six-week plan and Simon Lambert and his team of financial experts will reveal how to Protect Your Money. 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