Stamp duty rates will rise for those buying a second home after Chancellor Rachel Reeves confirmed major changes in her Budget today.
Stamp duty is a tax that is charged when you buy a property in the UK, with different rules for first-time buyers, home movers and people buying a second home. Second home buyers in England and Northern Ireland will see the rate they pay in stamp duty increase from the current rate of 3% to 5% from tomorrow, October 31.
However, the Chancellor did not announce an extension to the current stamp duty holiday. Under current rules in England and Northern Ireland, you have to pay stamp duty if your property is your only residence and is worth over £250,000. This is a temporary higher rate was introduced in September 2022 and is due to go back down to its previous level of £125,000 in March 2025.
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If you're a first-time buyer, you only pay stamp duty if the property you're buying is worth over £425,000 - but this will go back down to £300,000. Rules on stamp duty and the amount people pay depends on where they live in the UK. There are different rules exist in Wales and Scotland, which have different names for the tax.
In Wales, the tax the Land Transaction Tax, and in Scotland, it is part of the Land and Buildings Transaction Tax. Reacting to the news, Money guru Martin Lewis said the stamp duty rise is on top of the usual stamp duty rate. He wrote on X, formerly Twitter: "Stamp duty extra cost for 2nd homes to rise from 3% to 5% (so that's on top of normal stamp duty) - start TOMORROW."
Paul Johnson, the director of the Institute for Fiscal Studies, the independent economic research think tank, said raising the stamp duty rate on second homes would ultimately impact renters, who have to foot the bill. He said: "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."
Adam Pigott, the CEO of OpenBrix, a platform that connects letting and estate agents, said the change would leave a "sour taste" on the property market. He said: "An increase in stamp duty on second home purchases will leave a sour taste, as it will see an increase in costs for those looking to invest within the sector, although it's unlikely to deter them from doing so."
But Richard Donnell, Head of Research and Insight at property website Zoopla, said the hike would see more second homes hit the market in areas where second home ownership is higher. He said: "The extra 2% cost on buying second homes and investment property will reduce demand from second home buyers and investors.
"Second home buyers are already responding to last year’s Budget which allowed councils to charge double council tax for second homes. This is resulting in a higher level of selling by second home owners. In areas with above average second homes we have seen four times more homes come to the market."