The government has announced a 5% stamp duty surcharge on second homes, up from 3%, effective immediately, a move that has left landlords and property investors reeling.
The increased tax is anticipated to severely impact buy-to-let (BTL) investments, with many landlords likely to pull out, further straining the UK’s already challenged housing supply.
Richard Donnell, Head of Research and Insight at Zoopla, highlighted the regional implications, noting that “stamp duty has raised over £11.5bn this year, disproportionately affecting buyers in southern England, where London and the South East contribute over half of these receipts.” The extra 2% surcharge, he said, will put additional pressure on those looking to invest in second homes and buy-to-let properties, reducing demand and potentially accelerating a sell-off among existing landlords.
Donnell added that the surcharge follows another policy shift allowing councils to charge double council tax on second homes, which has led to a noticeable rise in second-home listings in areas where such properties are prevalent. He warns that these policies, combined with the end of first-time buyer stamp duty relief in April 2025, could make homeownership even less attainable. For first-time buyers in London, for instance, this change could mean an extra £15,000 in stamp duty costs, putting additional downward pressure on property prices as buyers seek discounts to offset these expenses.
Industry leaders are alarmed at the potential fallout. Ben Perks, Managing Director at Orchard Financial Advisers, remarked, “The Chancellor may have just killed off the buy-to-let market with immediate effect. A sudden 2% rise in stamp duty will shock the property industry, with many landlords unable to find the funds to complete on BTL purchases. Chains involving buy-to-let buyers are now at serious risk.”
Landlord and portfolio investor Kundan Bhaduri from The Kushman Group expressed frustration, likening the government’s approach to landlords to a “Monty Python sketch” of rising taxes and increased regulations. He criticised the policy’s impact on affordable rentals, stating, “It’s hard to offer affordable rentals when policies squeeze us dry—landlords aren’t public services. This increase in stamp duty is another kick in the teeth for small landlords nationwide.”
The property market is likely to feel the ripple effects of this latest policy shift, with landlords, investors, and even first-time buyers bracing for heightened costs. As BTL investments become increasingly unattractive, housing options in the private rental sector may shrink further, putting additional pressure on rental prices and limiting affordable housing availability.
Heather Powell, Head of Property & Construction at accountancy firm, Blick Rothenberg firm, said: “Buy to Let landlords face another challenge as a result of the increase in the SDLT higher rate – the sector is rapidly becoming one for professional landlords, buying properties ‘in bulk’ from developers, who can benefit from the economies of scale and commercial rates of SDLT.
“Landlords with a couple of properties held in their own name will welcome the freezing of the CGT rate on the sale of their properties at a maximum of 24%, and may will be considering that this is the time to sell.”
