The stamp duty changes in Rachel Reeves’ Budget last week will hit landlords now – but the biggest SDLT effect will be next spring, it’s being claimed.

Sarah Coles, head of personal finance at business consultancy Hargreaves Lansdown, says landlords rushed to sell ahead of a speech they thought would contain a Capital Gains Tax rise for investment property. 

But she says that while the speech did come with a blow for these landlords, it was not the one they were expecting. R

“Residential property escaped the capital gains tax hike, while the stamp duty surcharge for second properties rose from 3% to 5%. Nationwide says this could add £4,000 to the cost of a typical purchase. It could mean landlords back out of sales that were yet to complete, on the grounds that tax on sales has remained the same, and if they wanted to buy back in later, tax on purchases has risen” she cautions.

But her big fear is for the property market next year as a result of anode stamp duty move, rubber-stamped by Reeves. 

She continues: “The additional stamp duty for landlords may well damage that corner of the market. However, the end of the stamp duty holiday is likely to have a far more far-reaching effect. The fact it wasn’t extended in the Budget means stamp duty is being hiked more generally at the end of March. 

“This holiday was ushered in by the [2022] mini-Budget, and means there’s no stamp duty for first-time buyers on the first £425,000 of a property’s value – up from £300,000. This applies to all homes worth up to £625,000 – up from £500,000. For existing owners, the threshold was doubled from £125,000 to £250,000. 

“The end of the holiday is likely to mean a rush of purchases early next year, to get in ahead of the change, so we could see prices rise at that point as buyers bring forward their plans. Once the higher rate kicks in, we could well see some of that unwind.”

Meanwhile Coles warns that buyers have to contend with mortgage rates, which are likely to rise as a result of the Budget. 

“The bond market hasn’t loved the level of borrowing baked into the Budget, so the markets are asking the government to pay handsomely for the privilege. This means gilt yields rising, which they have done considerably since the speech. 

“This isn’t anything like the carnage after the mini-Budget, because yields have climbed more slowly. However, it will take a toll on mortgage rates.”