Stamp Duty has been a hot topic lately, with the Labour government increasing this tax on property purchases twice since taking office in July 2024. With the Renters’ Right Bill stirring further debate, many landlords feel like they’re under attack — and understandably so.
However, when we crunched the numbers on Stamp Duty Land Tax (SDLT), the actual impact might be less severe than it first appears. Whether you’re buying at £250k or £900k, the most recent SDLT increase only adds around £2.5k. That’s not insignificant, but compared to other changes, it’s relatively minor.
What’s more noticeable is the difference between April 2024 and April 2025. For example:
A £250k investment property would have incurred £7.5k in SDLT in April 2024, but by April 2025, that figure doubles to £15k.
A £900k property jumps from £59.5k to £80k in the same period, a £20.5k increase.
Why the SDLT Increases?
- The Housing Shortage
We all know there aren’t enough homes. From rentals to first-time buyer properties and retirement-friendly housing, the supply-demand imbalance is significant. The government has pledged to build 1.5 million homes during this term, but Bidwells estimates England alone needs 550,000 new homes annually to tackle the crisis. A further study from the Centre for Cities highlights a backlog of 4.3 million homes that were never built. Until the supply issue is addressed, policies like increased SDLT aim to reduce the number of rental properties and encourage homeownership.
- First-Time Buyers (FTBs)
Labour is determined to get more first-time buyers onto the property ladder. By discouraging investment purchases, they hope to make more homes available for FTBs. While this may support homeownership, it also exacerbates rental shortages. The reintroduction of 100% mortgages through lenders like NatWest and Skipton Building Society is one response to this challenge. However, it’s important to note that the real issue remains the planning system, construction skill shortages, and a growing population — not just landlords.
- Government Deficit
With a projected deficit of £137 billion in 2024–25, up from £131 billion the previous year, the government is using SDLT increases as a revenue-raising measure. This is part of a broader effort to reduce the national debt.
What Does This Mean for Property Investors?
- Property Prices
Sales agents have yet to adjust valuations to account for higher costs. Many properties are still priced using outdated calculations. As a result, well-priced stock sells quickly, while overpriced properties linger. Investors should make offers that reflect true market value and factor in all associated costs (SDLT, legal fees, arrangement fees, and interest rates) to ensure a sustainable investment.
- Opportunities to Pick Up Deals
There may be strong opportunities to buy below market value, particularly from older landlords exiting the market or properties with prolonged time on the market. To capitalise, ensure your funds are readily accessible, and work with experienced solicitors and brokers. For a £250k property, expect to need around £62.5k for a 75% LTV deposit and another £18k for fees, not to mention additional lender and insurance costs.
- Rising Rents and Strong Rental Demand
The supply-demand imbalance will likely continue driving rent increases. The Office for National Statistics (ONS) reports a 6.8% average rent increase in Plymouth over the 12 months leading up to February 2025. This trend benefits landlords, especially in properties like HMOs and apartment blocks, where rental yield directly impacts value.
- Buy, Refurbish, Refinance (BRR)
BRR strategies remain popular. For example, buying a £250k property, investing £100k in refurbishments, and achieving a post-refurb value of £450k could yield a £75k profit while saving on SDLT. By avoiding the higher tax bracket on the post-renovation value, this approach is a smart play.
However, proceed cautiously. In particular, the student rental market is predicted to decline, potentially over-saturating the high-end HMO market. Conservative estimates for both refurbishment costs and rental income will be key to ensuring profitability.
Final Thoughts
While the SDLT increase makes property investment more challenging, opportunities remain for those who understand the market or work with experienced professionals.
Demand for quality rental properties is still strong, and by making calculated moves, investors can thrive in this evolving landscape. If you have questions or want tailored advice, we’re here to help!
