Government Confirms Stamp Duty Surcharge Targets Landlords

The UK government has acknowledged that the increased stamp duty surcharge on additional dwellings is intended to disadvantage landlords while supporting first-time buyers. Chancellor Rachel Reeves announced in the 2024 Autumn Budget that the surcharge on second homes and buy-to-let properties would rise from 3% to 5%. This adjustment forms part of a broader strategy to give first-time buyers a financial advantage in the housing market.

Alongside the surcharge increase, the Budget also lowered the Stamp Duty Land Tax (SDLT) thresholds in England. The exemption threshold for first-time buyers dropped from £425,000 to £300,000, while the threshold for standard residential properties fell from £250,000 to £125,000. These changes mean that more buyers, including landlords purchasing additional properties, will face stamp duty charges.

Impact on Landlords and the Private Rented Sector

In a written parliamentary question, Liberal Democrat MP Roz Savage asked the Chancellor about the potential effects of the SDLT surcharges on long-term participation in the private rented sector. Labour MP Dan Tomlinson responded by stating that the Higher Rates for Additional Dwellings (HRAD) ensure first-time buyers and home movers have an advantage over landlords, second home buyers, and companies purchasing residential property.

Despite the government’s position, landlords face significant financial burdens due to the surcharge increase. Many landlords will pay hundreds of pounds more in stamp duty when acquiring additional properties, adding to the costs of maintaining and expanding rental portfolios.

Concerns Over Rental Supply and Tenant Impact

Industry experts have warned that raising the surcharge to 5% could reduce the supply of rental properties, ultimately disadvantaging tenants. Paul Johnson, head of the Institute for Fiscal Studies, highlighted on X (formerly Twitter) that stamp duty is one of the most problematic taxes. He explained:

“In order to ultimately keep people in much-needed and affordable private rented homes, we continue to stress the importance of support for the private rented sector, including incentives for landlords to invest rather than continuing to penalise them through regulatory bombardment and increasing costs.”

Johnson further noted that although the surcharge targets wealthier buyers and landlords, tenants will bear part of the cost as fewer properties become available to rent.

Additional Tax Pressures on Landlords

The 2025 Autumn Budget introduced further financial pressures on landlords by raising tax rates on dividends, property, and savings income by 2 percentage points. This increase means landlords will face higher taxes on rental income, compounding the challenges posed by the stamp duty surcharge hike.

What This Means for UK Landlords

Landlords should prepare for increased upfront costs when purchasing additional properties due to the higher stamp duty surcharge. The combination of rising taxes and regulatory pressures may affect investment decisions and the availability of rental properties. Letting agents and property managers may also experience the knock-on effects of reduced rental stock and potential rent increases as landlords seek to offset higher expenses.

Landlords are advised to review their portfolios and financial strategies in light of these changes and to stay informed about further government policies affecting the private rented sector.