UK households face waking up to £6,250 stamp duty bill starting tomorrow

Stamp duty on the purchases of second homes, buy-to-let residential properties, and companies purchasing residential property in England and Northern Ireland, will rise from 3% to 5% on Thursday. Analysts say this could affect landlords' willingness to buy more properties. If the supply of rental properties is squeezed, that could mean rents rise for tenants in the remaining homes.

At the moment, buyers of homes worth less than £250,000 don't pay stamp duty. This was doubled from £125,000 under Liz Truss's mini-Budget in September 2022. The threshold is £425,000 for those buying their first property. This was raised from £300,000 as part of the mini-Budget.

These higher thresholds will end in March 2025, when they are expected to revert to previous levels. These bands are: £0-£250,000 (£425,000 for first-time buyers) = 0%, £250,001-£925,000 = 5%, £925,001-£1.5m = 10% or £1.5m+ = 12%.

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Stamp Duty Land Tax (SDLT) is a tax due if if you buy a property or land over a certain price in England and Northern Ireland. You pay the tax when you buy a freehold property, buy a new or existing leasehold, buy a property through a shared ownership scheme or take on a mortgage or buy a share in a house

The amount of stamp duty you owe depends on the cost of the property, whether it will be used for residential purposes, and whether you own any other property. It means a second home buyer pays £6,250 for a £125,000 property.

onathan Stinton, Head of Intermediary Relationships at Coventry Building Society, said: “Landlords have already been clobbered with the 3% Stamp Duty surcharge now, by going to 5%, the bill on average priced property will shoot up over £6k overnight.

"The country needs a healthy, thriving private rental sector, but immediately hiking the Stamp Duty surcharge to 5% is disincentivising any further investment from current and would-be landlords. It’s a significant blow to the sector and, without dramatic housebuilding to improve supply, it could lead to a shortage of rental homes, and push rents up.”

Ben Perks, Managing Director at Orchard Financial Advisers commented: "The Chancellor may have just killed off the buy-to-let market with immediate effect. A 2% rise in Stamp Duty by tomorrow will cause shockwaves throughout the property industry. Anyone completing on a buy-to-let purchase tomorrow has to find a few thousand pounds to continue, and this just won't be possible for many landlords. It’s a wider issue than first thought, though. Any chain with a buy-to-let purchase within it is now in a highly precarious position."

Craig Fish, Director at Lodestone Mortgages & Protection commented: "This is another nail in the coffin of buy-to-let. Transactions in process are now at real risk as investors may well pull out and this will have a negative impact on any property chains where a buy-to-let is involved. This is going to have a further negative impact on UK housing stock, pushing rents higher."