Landlords race to exchange contracts and avoid stamp duty rise

Landlords are racing to exchange contracts on purchases to avoid additional tax bills of tens of thousands of pounds after the government stung them with a surprise rise in stamp duty.
From midnight on Wednesday, the surcharge paid by second-homebuyers and investors on the tax paid when purchasing property increases by 2 percentage points to 5 per cent.
An analysis by Savills found that a landlord or second-homeowner buying a home worth £500,000 would face an additional bill of £10,000 after the rise — from £27,500 to £37,500.
Meanwhile, a buyer of a £1 million home would pay an additional £20,000, up from £71,250 to £91,250. The Treasury confirmed that anyone who failed to exchange by the end of Wednesday would have to pay the higher rate.
Rachel Reeves indicated that the move would deter landlords and second-homeowners from investing, saying: “This is expected to result in 130,000 additional transactions over the next five years by first-time buyers and other people buying a primary residence.”
Landlord lobby groups and economists, however, retorted that it could ultimately lead to a chronic shortage of property for renters and soaring prices, following on from years of tax rises dating back to 2016, when George Osborne was chancellor.
A Capital Economics report, commissioned by the National Residential Landlords Association, warned it could lead to 540,000 properties being lost from the rental sector in 10 years — 12 per cent of the UK’s national rental stock. In an article in The Times in January, Paul Johnson, director of the Institute for Fiscal Studies, forecast that taxing landlords further would lead to a sharp rise in rents.
“Hiking stamp duty on homes to rent when 21 people are chasing every rental property makes no sense,” Ben Beadle, chief executive of the National Residential Landlords Association, said. “This will not help the huge number of tenants for whom home ownership is still a distant dream.”
Illustrating that the move was designed to deter investment rather than raise revenue, the Office for Budget Responsibility calculated that it would bring in only an extra £400 million by 2029-30. By contrast, stamp duty as a whole is expected to raise £14.1 billion in 2024-25, a 10.5 per cent increase from last year because of extra transactions in a reviving property market. This is forecast to rise to £25.4 billion in 2029-30.
Stamp duty, which is paid when you buy a property or land in England and Northern Ireland, is a graduated tax that climbs from zero up to a maximum of 12 per cent depending on the property price. Before the change at midnight on Wednesday, landlords and owners of second homes pay 3 per cent extra on top, but this will rise to 5 per cent on Thursday.
Saif Derzi, 33, a landlord with a portfolio of 70 properties, was struggling to get six purchases to the point of exchange on Wednesday evening, saving between £40,000 and £50,000 in stamp duty.
Derzi, an investor who buys properties from distressed sellers, then sells them on, said he wanted to divest his long-term portfolio because of rising taxes.
“Having an immediate cliff-edge like this will create a huge shock — it’ll affect hundreds of thousands of ongoing purchases,” he said.
The rise was announced minutes after landlords were relieved to be spared a rise in capital gains tax on their profits. It will apply only to investors.
Groups representing renters and first-time buyers were delighted with the change.
Tom Darling, director of the Renters’ Reform Coalition, said: “It’s right that the tax system supports first-time buyers over those buying up homes as investment properties.
“There are many renters keen to buy who could benefit from a helping hand.”