## Stamp Duty Surcharge and Its Effect on the Private Rented Sector

Ten years after the introduction of the second home stamp duty surcharge on 1 April 2016, research from Hamptons indicates the private rented sector (PRS) in Great Britain is significantly smaller than it might have been without the tax. The surcharge added an extra 3% tax on purchases of additional properties in England and Scotland, marking a clear policy shift favouring owner-occupiers over landlords. Since then, the surcharge rate has increased to 5% in England as of October 2024, with Wales and Scotland applying 5% and 8% respectively.

Hamptons’ analysis estimates that if the PRS had continued growing at pre-2016 rates, there would be around 7.4 million privately rented households today. Instead, the current figure is closer to 5.2 million, representing roughly 2.2 million fewer rented homes. This means about 18% of households now rent privately, compared with an implied 25.6% share based on earlier trends.

## Government’s Intended Market Shift Achieved

Aneisha Beveridge, head of research at Hamptons, stated: “Higher rates of stamp duty for anyone buying a second home have broadly delivered what the government of the day set out to achieve.” She explained that the market shifted almost immediately away from investors, resulting in fewer homes entering the rented sector and more becoming owner-occupied.

However, Beveridge also highlighted unintended consequences: “Large stamp duty bills have also brought side effects, particularly as the wider tax and regulatory environment for landlords has tightened.” She noted that tenants unable or unwilling to buy have faced rent increases exceeding inflation, and those on the margins of the rental market have found it harder to secure accommodation.

## Rising Costs for Buy-to-Let Investors

The surcharge has widened the cost gap between different types of buyers. For example, a £350,000 buy-to-let purchase in England now attracts around £25,000 in stamp duty for an investor, compared with £7,500 for a home mover and £2,500 for a first-time buyer. Despite a smaller share of transactions, landlords subject to the surcharge still contribute a substantial portion of stamp duty revenue—48% of all residential stamp duty receipts in the 2024/25 tax year, according to Hamptons.

This increased financial burden has discouraged some landlords from investing further in the PRS. Before the surcharge’s introduction, landlords accounted for 16.5% of property purchases, above the previous five-year average of 14.5%. Since then, this share has fallen to 11.8%, and in 2026 so far, it has dropped further to 10.8%, coinciding with the surcharge rising from 3% to 5%.

## Shrinking Rental Market and Rising Rents

The number of homes available to rent has declined markedly. In February 2026, there were 25.4% fewer rental properties on the market than in February 2016. Over the same period, rents increased by 44.1%, outpacing Consumer Price Index (CPI) inflation, which rose by 39.9%. Annual rent growth has averaged 4% since the surcharge’s introduction, compared with 3% per year in the five years prior.

Hamptons’ analysis suggests that the stamp duty surcharge has added approximately 1% to annual rent growth over the last decade, equating to roughly £70 more per month for tenants. This reflects the squeeze on supply and increased costs landlords face, which are often passed on to renters.

## What This Means for UK Landlords

The stamp duty surcharge has reshaped the investment landscape for landlords, increasing upfront costs and reducing the number of buy-to-let purchases. While it has supported government aims to encourage home ownership, it has also contributed to a smaller private rented sector and higher rents. Landlords should be aware of these ongoing market pressures and consider the implications for portfolio growth and rental pricing strategies.

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Suggested internal link anchors

– private rented sector
– stamp duty surcharge
– buy-to-let investment costs
– rental market trends
– landlord tax changes
– rent inflation
– property purchase tax
– landlord investment decline
– tenant affordability
– housing market shifts

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TLA update

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