How the latest changes to Stamp Duty could shape the market

With the recent announcement from Chancellor Rachel Reeves, the UK property market faces another shift. Starting from 31 October 2024, the Stamp Duty surcharge on second homes and buy-to-let properties will increase from 3% to 5%. While this change is set to impact landlords and second-home buyers, the Chancellor has kept current stamp duty thresholds raised until April 2025 for first-time buyers and home movers.  

But what does this mean for estate agents and the broader property market? We take a closer look, with insights from Iain McKenzie, CEO of The Guild of Property Professionals, on how estate agents might navigate these changes and what potential buyers can expect. 

Key changes to Stamp Duty and their implications 

Higher costs for second-home buyers and investors 

The Chancellor's update brings a notable increase in stamp duty for those purchasing additional properties. For second homes and buy-to-let investments, the surcharge is rising by 2%, reaching 5%. Here’s how the new stamp duty bands break down for additional properties: 

£0 - £250,000: 5% 

£250,001 - £925,000: 10% 

£925,001 - £1.5 million: 15% 

Above £1.5 million: 17% 

This increase will likely result in second-home buyers and investors weighing their options more carefully. McKenzie comments, “The new surcharge will undoubtedly make many second-home and buy-to-let investments more expensive, which could see some buyers stepping back from purchasing additional properties altogether.” 

Potential decrease in rental supply 

With increased upfront costs, some landlords may reconsider expanding their portfolios, while others might hesitate to keep their first property as a rental when upgrading. If more landlords exit the market, this could reduce the supply of rental properties. According to McKenzie, “As landlords face higher costs, we may see a reduction in available rental properties, which could lead to increased competition for rentals and, subsequently, drive up rental prices.”

This effect on rental supply is essential for agents to monitor, as a constrained rental market could shift demand towards purchasing primary residences, especially among renters facing rising costs. 

Extended relief for first-time buyers and home movers until 2025 

Fortunately, the current raised thresholds remain in place for first-time buyers and home movers until April 2025.  For first-time buyers there will be no stamp duty on properties costing up to £425,000. However, from next April, this will be lowered to £300,000. 

For home movers selling their home to buy their next home, the stamp duty threshold of £250,000 also remains in place until April 2025. Thereafter, the stamp duty thresholds will revert to pre-2022 levels, meaning: 

£125,001 to £250,000 will be subject to a 2% Stamp Duty rate (currently 0%). 

McKenzie notes, “As we head towards the deadline of threshold change, we’re likely to see a rush in market activity leading up to April 2025. Buyers aiming to make the most of these current rates should start planning their transactions now to avoid additional costs.” 

Impact on market activity leading to April 2025 

Historically, stamp duty changes have triggered a surge in transactions as deadlines approach. As we near April 2025, there may be heightened demand from homebuyers hoping to benefit from the current thresholds, with many aiming to finalise purchases before the less favourable rates take effect. 

McKenzie reflects, “Previous stamp duty holidays have shown us that market activity often spikes as we approach the end of relief periods. Estate agents should prepare for an increase in inquiries from buyers looking to accelerate their purchasing timelines.” 

These changes to stamp duty are likely to shape both buyer behaviour and market trends. For estate agents, it’s crucial to stay informed on these policy shifts and be ready to support clients through what may become a complex buying landscape. McKenzie advises, “Estate agents should be proactive in communicating these updates to clients and helping them assess the best timing for their transactions. For those in the rental sector, it’s also worth exploring potential knock-on effects for landlords and prospective renters, as the rental market may experience new pressures.” 

The Chancellor's adjustments mark a crucial point in the UK property landscape. As estate agents brace for a potential shift in market dynamics, staying informed and guiding clients on the implications of these changes will be key to navigating a challenging yet opportunity-rich environment.