In October, the UK government announced an increase in Stamp Duty Land Tax (SDLT) for buy-to-let properties and second homes over £40,000.
Chancellor Rachael Reeves told MPs that this will support over 130,000 first-time buyers.
For landlords, however, this means higher costs when buying extra properties – which can have broader implications on the property sector.
With these increases taking effect from 31st October 2024, and further changes coming in April 2025, it’s important for landlords to understand the financial impact of these changes.
Here, we tell you everything you need to know.
Understanding the New Stamp Duty Rates
Stamp Duty is a tax that you pay when when buying a property in the UK. It is usually calculated as a percentage of the total property price, with first-time buyers getting the best rates.
Buy-to-let properties and second homes are subject to higher rates than primary residences. This has always been the case, however these newer, higher rates are making it even more difficult for investors and landlords to add to their portfolios.
Stamp Duty Rates for Buy-to-Let and Second Homes
From 31st October 2024 – 31st March 2025:
| Property Value | SDLT Rate |
|---|---|
| Up to £250,000 | 0 |
| £250,001 – £925,000 | 5% |
| £925,001 – £1.5 million | 10% |
| Above £1.5 million | 12% |
For example, if you buy a property for £850,000 your SDLT will be calculated as:
0% on the first £250,000 = £0
5% on the final £550,000 = £27,500
total SDLT = £27,500
However, this is about to change
From 1st April 2025:
| Property Value | SDLT Rate |
| Up to £125,000 | 0 |
| £125,001 – £250,000 | 2% |
| £250,001 – £925,000 | 5% |
| £925,001 – £1.5 million | 10% |
| Above £1.5 million | 12% |
If you bought the same £850,000 property after April, your SDLT would be calculated as:
0% on the first £125,000 = £0
2% on the second £125,000 = £2,500
5% on the final £600,000 = £30,000
total SDLT = £32,500
This makes the purchase significantly more expensive for landlords, even though it’s just a few months apart.
The Impact These Rises Could Have On Landlords
Less demand for property, slowing investment appreciation
As prices go up, more people will be priced out of the market.
This means there will be less demand for properties, potentially driving prices down. Landlords that are looking at their property investments long-term might see slower growth because of this. (Golding)
Higher tenant demand
As more landlords and investors decide not to buy properties for letting, the amount of rental properties available will drop.
This could mean higher tenant demand for rental properties, potentially pushing rents up.
Lower profits for landlords
Whilst the idea of higher rent might sound like a good thing, this is offset by the higher taxes.
Landlords will have to come up with a financial plan that allows them to cover their losses without out-pricing good tenants.
Difficulty expanding property portfolios for independent landlords
As SDLT rises, small independent landlords are much more likely to feel the pinch.
This could potentially lead to more institutional investors having a monopoly as it gets more difficult for independent landlords to expand their portfolios.
How Can Landlords Navigate the Changes?
When policies change, it’s always important to stay up to date and get professional advice where you can.
Speaking to a property management company can help you understand how these changes might affect you and your portfolio.
Here are a few other things you should do:
Look at your portfolio: Think about what the best next step is and whether it might be time to sell, or double down and invest more.
Invest in commercial property: Commercial properties don’t incur the same SDLT as residential ones. Look into this as an alternative investment to try and get a better yield.
Explore opening a Limited Company: If you plan to expand your portfolio, think about opening a limited company. This could help you with tax benefits that will help offset the SDLT increase.
Buy before April 2025: If you have your eye on a property, think about speeding up the process to avoid the new tax hike.
Evaluate rental yields: See if the rent you are charging can help offset these higher costs.
Stay informed: Keep up to date with the latest changes as the government may change regulations if they are having an adverse effect.
Stamp Duty Increase: How Does It Affect Landlords?
The Stamp Duty hike does come with extra challenges for UK landlords, especially those looking to expand their portfolios.
Whilst the policy does aim to make housing more affordable for first-time buyers, it could have an adverse effect on the rental industry.
As a landlord, it’s important to stay up to date with the latest advice, evaluate your returns and come up with a plan.
For professional advice around stamp duty increases, contact J Property Management’s London Property Management team at info@jpropertymanagement.co.uk
