Chancellor Reeves has announced that the government will increase the stamp duty surcharge for second homes from tomorrow.
In a surprise announcement, Reeves said that stamp duty on second homes will rise by 2% to 5% from 31st October 2024.
As a result, the average stamp duty bill on second homes (based on the average UK house price of £309,572) will increase from £12,265 to £18,457, and even higher to £20,957 once the temporary stamp duty threshold ends in April 2025.
In its Budget documents, the government confirmed that these higher rates apply to purchases of second homes, buy-to-let residential properties and companies purchasing residential property.
It says the increase will provide those looking to move home or purchase their first property "with a comparative advantage over those purchasing additional property".
The government expects the additional tax to result in 130,000 additional transactions over the next five years by first-time buyers and other people buying a primary residence.
However, the Chancellor did not announce an extension to the current stamp duty holiday for first-time buyers and homemovers.
Liz Truss’ mini budget in September 2022 saw the threshold for stamp duty increase from £125,000 to £250,000, with the threshold for first properties increased from £300,000 to £425,000.
The temporary stamp duty exemption threshold for first-time buyers, currently set at £425,000, is due to fall back to £300,000 from April 2025.
In addition, existing homeowners will pay stamp duty on any property over £125,000 from April, down from £250,000.
Angharad Truman, ARLA Propertymark president, commented: “We continue to see a growing disparity in the number of private rented homes available against a backdrop of increasing demand from tenants. Therefore, it is disappointing to see that the UK Government did not address this fundamental issue in its Autumn Budget and instead has announced yet another blow for landlords by increasing stamp duty on second homes.
“The private rented sector plays a crucial role in housing the nation with over 4.6 million homes in England alone, therefore it is imperative that the UK Government does not continue to push landlords out of the market.
“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.”
Emma Cox, MD of real estate at Shawbrook, added: “The Government should of course priotise the needs of renters and buyers, but landlords will feel like they are once again bearing the brunt of punitive measures with a further increase in the stamp duty surcharge on additional homes coming into effect from tomorrow.
“The Private Rental Sector (PRS) has a key role to play in the UK housing market, and will be a crucial component to providing adequate stock. Demand still far outweighs the supply of quality homes, and tackling this will be extremely difficult if landlords are disincentivised by government measures. Our research shows that landlords have confidence in the market, with a third planning to add to their portfolios in the next 12 months, so the Government should be incentivising - not deterring.
“Providing sufficient stock and meeting Labour’s ambitious housebuilding plans is going to require a multi-pronged approach, and landlords are an important piece to the puzzle. The Government must consider how to support landlords if we are to see real progress in the market.”
