Stamp duty hike ‘nail in the coffin’ for buy-to-let

The government’s Autumn Budget saw the buy-to-let property sector hit with significant tax hikes, as Labour looks to bring more first-time buyers into the housing market. 

Chancellor Rachel Reeves has increased the Stamp Duty Land Tax from 3 per cent to 5 per cent for individuals purchasing an additional property in England and Northern Ireland, including second homes and buy-to-let properties. “This will support over 130,000 additional transactions from people buying their first home, or moving home over, the next five years,” said Reeves. 

However, the National Residential Landlords Association (NRLA ) has said the changes “made no sense” and that harsher taxes and costs will only push up rent, ultimately discouraging investment from landlords. Wealth manager Quilter said it was “another nail in the coffin” for the buy-to-let sector. This comes alongside the Renters Reform Act, which will limit evictions, although Reeves kept capital gains tax for residential property flat at 18 per cent or 24 per cent, depending on income. 

Aneisha Beveridge, head of research at Hamptons, said the rise in stamp duty would create a “bigger barrier to entry” for investors, particularly in the more expensive southern market, and lower supply for renters. 

She said: “Landlord purchases are already at a record low, with buy-to-let investors buying 10 per cent of all homes sold across Great Britain this year. The stamp duty hike will act as a further disincentive, reducing this figure to 7-8 per cent in the longer term.”

This is down from 16 per cent a decade ago, according to Hamptons. Despite the government's focus on bringing more first-time buyers to the market, they will also pay more stamp duty, with the threshold for when the tax kicks in falling from £425,000 to £300,000 in April. This is after the new government decided not to extend a temporary increase enacted by the Conservatives.

Those within the sector have also called Labour’s decision a missed opportunity to encourage older homeowners to downsize, freeing up larger properties for families.

Quilter tax and financial planning expert Rachael Griffin, said: "This would encourage older homeowners to look at downsizing their proprieties without increased stamp duty costs, which would ultimately free up larger houses for growing families and create more of a balance across the UK house stock."