The Government must reform stamp duty in order to support first-time buyers (FTBs), the Housing, Communities and Local Government (HCLG) Committee has stated.

The cross-party committee’s Affordability of Home Ownership report said the tax has a "direct impact" on housing affordability, simply by increasing how much people must pay on a home.

While FTBs do not pay stamp duty on purchases up to £300,000, a 5% tax is applied to purchases between £300,001 and £500,000.

FTBs purchasing a home worth more than £500,000 are not granted FTB benefits for stamp duty purposes and therefore must pay the usual rates for a single property, which are much higher.

The committee has highlighted that FTBs are the most disadvantaged people for this transaction tax, especially in London and the South East, where the average house price is above the £500,000 threshold.

As part of the report, industry figures have spoken out in favour of a shake-up in stamp duty. The Association for Mortgage Intermediaries told the HCLG that a review of the stamp duty regime is "long overdue", while Nationwide Building Society has called for a full-scale Government review of the property tax system, including stamp duty, council tax and capital gains tax.

The HCLG committee concluded that stamp duty is a tax that "puts barriers" in front of FTBs and the current system must not be maintained in its current form.

It has therefore called for a reformation of the system to improve affordability, and has called on the Government to launch a consultation into the potential alternatives of the current tax.

It added that options to consider could includer a full replacement with a revenue-neutral alternative; a reduction in rates to stimulate transaction numbers; an overhaul of banding thresholds to tie more closely with local property prices and remain relevant over time; and an update to reliefs and exemptions so that they better meet the Government’s goals.

Chair of the HCLG committee, Florence Eshalomi MP, concluded: "Rates of home ownership in England have declined over the last 20 years. For many people, and especially for those unable to draw upon the bank of Mum and Dad, the prospect of owning a home is little more than a pipe dream. No silver bullet exists but the Government can apply a range of supply and demand-side measures to help people get on the property ladder.

"Reform of stamp duty is necessary but, especially given the public finance implications, this cannot be done in isolation or without a credible alternative in place. We urge the Ministry of HCLG and HM Treasury to consult on alternatives to stamp duty that can deliver long-term benefit and not a short-term fix which only distorts the housing market and exacerbates the affordability problem.

"The report notes there are hundreds of thousands of residential properties that are currently empty, many of which have been empty for many months or years, and that bringing them back into residential use could benefit home supply and improve the affordability of home ownership. The report recommends the Government make it easier for councils to take control of empty properties in their local authorities, by clarifying councils' existing powers, and providing new options to recover long-term empty residential properties."

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