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Rachel Reeves has been warned her decision to hike stamp duty for second home-buyers will punish renters as well as landlords.
At Wednesday’s Budget the chancellor announced that second-home buyers will face an increase of 2 percentage points to the stamp duty land tax (SDLT) surcharge, taking the additional tax to 5 per cent.
The surcharge is paid on top of standard stamp duty rates, which are charged on properties above the value of £250,000. First time buyers are exempt on properties up to the value of £425,000.
The change, coming into force from Thursday, will make it more expensive for landlords to purchase further properties and is aimed at “supporting first-time and main home buyers”, Ms Reeves said.
But there are concerns the move could have a detrimental impact on renters, making it more expensive for people to purchase buy-to-let properties and decreasing the number of rental properties on the market.
Follow live coverage of Rachel Reeves’ historic Budget
Paul Johnson, director of the Institute for Fiscal Studies, said he “despairs” over the policy, warning that “those looking to rent will pay part of the cost”.
Writing on X, Mr Johnson warned: “I have long said stamp duty is among our worst taxes. So what do we have? An increase for those buying second properties.
“You might think fine: a tax on rich people and landlords. But those looking to rent will pay part of the cost as fewer properties made available. I despair”.
Speaking in the Commons, Ms Reeves said: “In our manifesto, we committed to reforming stamp duty land tax to raise revenue while supporting those buying their first home.
“This will support over 130,000 additional transactions from people buying their first home, or moving home, over the next five years.”
It comes as part of £40bn worth of tax rises announced by the chancellor on Wednesday, as she promised to “fix the foundations” of the economy and repair the public finances.
Ms Reeves promised to “invest, invest, invest”, pledging billions of extra spending on schools and the NHS, but she said the “black hole” left by the Conservatives requires tens of billions of additional taxes.
Speaking ahead of the budget this morning, pre-empting changes to the tax, property expert Kirstie Allsopp warned that the system for buying and selling houses in the UK is “completely broken”.
Speaking about SDLT, she told Times Radio: “It’s become so complicated that I can no longer tell anyone what they would be paying in stamp duty.
“I have to go onto the stamp duty calculator and calculate it with the government calculator per property and I have to put in all the different circumstances…Stamp duty has become a monster.”
“It won’t claw back any money…Stamp duty is a dead tax”, she added.
