Rachel Reeves uses Budget to hammer those buying second homes

by · Mail Online

Rachel Reeves used her Budget today to hike stamp duty for buy-to-let landlords and those buying holiday homes.

The Chancellor announced, from as soon as tomorrow, those purchasing additional properties will have to pay a 5 per cent surcharge.

This is a two percentage point increase of the current 3 per cent surcharge, with Ms Reeves boasting the move will benefit other homeowners.

But there were warnings that Labour's action 'makes no sense' because it would only result in higher rents for tenants.

The Chancellor also made no announcement on extending the current discount on stamp duty, which was introduced by the Tories in 2022.

It means, from 31 March next year, home-buyers face paying thousands of pounds more in stamp duty.

In her Budget speech this afternoon, Ms Reeves told the House of Commons: 'We are increasing the Stamp Duty Land Tax surcharge for second homes - known as the higher rate for additional dwellings - by two percentage points to 5 per cent from tomorrow.

'This will support more than 130,000 additional transactions from people buying their first home, or moving home, over the next five years.'

Rachel Reeves used her Budget today to hike stamp duty for buy-to-let landlords and those buying holiday homes 
The Chancellor announced, from as soon as tomorrow, those purchasing additional properties will have to pay a 5 per cent surcharge

The Treasury forecast the increase in the surcharge would earn £310million per year by 2029-30.

Ms Reeves could be in for a bigger windfall in April when temporary changes to stamp duty thresholds are set to expire.

In 2022, the Tories pushed the tax-free threshold for all homebuyers from £125,000 to £250,000.

This also saw the tax-free threshold for first-time buyers increase from £300,000 to £425,000, as part of changes that are due to end on 31 March.

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The Conservatives promised before the general election to make the stamp duty discount for first-time buyers a permanent change.

But Ms Reeves did not announce an extension to the scheme today. She could raise £1.8billion a year by 2029-30 by returning to the lower thresholds.

An analysis by Savills showed first-time buyers in London would pay an additional £6,250 from 1 April, on average, when the tax-free threshold reduces.

This would be an increase from the current average level of stamp duty of £2,752 up to £9,002. The average property price for new homeowners in the capital is £480,040.

In the South East, where the average first-time buyer price is £314,675, first-time buyers would pay £734 in stamp duty, on average, after the discount expires.

The average first-time buyer in the South East does not currently pay stamp duty.

Across the whole UK, the ending of the temporary stamp duty discount will see an extra £2,500 paid on the average home purchase. 

Property experts warned of Britons rushing to complete home purchases before the cliff-edge deadline at the end of March.

Responding to the increase in the surcharge on additional properties, Ben Beadle, of the National Residential Landlords Association, said: 'Hiking stamp duty on homes to rent when 21 people are chasing every rental property makes no sense.

'Analysis by Capital Economics has found that increasing stamp duty on rental properties from three to five per cent will see a net loss of half a million homes to rent over 10 years.

'This will not help the huge number of tenants for whom homeownership is still a distant dream.

'The Chancellor has failed to heed the warnings of the Institute for Fiscal Studies that higher taxes on the rental market lead only to rents going up.

'What tenants needed was a Budget to boost the supply of new, high-quality rental housing. What we got is a recipe for less choice and higher rents.'

Property-buyers do not pay the surcharge if the home they are buying is their main residence and has already been sold.

But those who have not sold their main residence on the day they complete their new purchase have to pay higher rates. This is because they own two properties.

They can apply for a refund if they sell their previous main home within 36 months.

If it takes longer than 36 months to sell their previous main home, property purchasers may still be able to get a refund under certain circumstances.

The Treasury said the increase in the surcharge would provide those looking to move home or purchase their first property with a comparative advantage over those purchasing additional property.

They added this was expected to result in 130,000 additional transactions over the next five years by first-time buyers and other people buying a primary residence.

Those who have exchanged contracts prior to tomorrow are not affected by the rate increase.