A new analysis by business consultancy Hargreaves Lansdown sets out what it calls “bad news by the bucketload” for property investors.

New data from HMRC over the weekend shows that quarterly values for residential stamp duty receipts in Q4 2024 (£3,015m) were at their highest since Q4 2022 and were up 31% annually.

Sarah Coles, head of personal finance at Hargreaves Lansdown: “Stamp duty clobbered buyers as they rushed to complete sales before any potential bad news in the autumn Budget. Property investors got bad news by the bucketload during the announcement, which means stamp duty bills are only going to get bigger.”

Coles says that someone investing in a second property costing £249,000 before the Budget would pay £7,460 less in stamp duty than someone investing on April 1 this year, once stamp duty thresholds revert to previous levels. 

The more expensive the property, the more the additional cost – so someone investing in a second property costing £500,000 would pay an extra £12,500. 

Coles continues: “And that’s just the start of it. When an investor rents out the property, they also pay income tax on rental income. You haven’t been able to claim full tax relief on your mortgage interest since 2017, and because the income tax thresholds have been frozen since 2021, it means more people paying higher rates and facing bigger bills.

“Then when you come to sell, there’s capital gains tax to worry about. The annual allowance has dropped to just £3,000, and the rate is 18% for basic rate taxpayers and 24% for higher-rate taxpayers – and if the gain pushes you over a threshold you’ll pay some of this tax at a higher rate.

“And there’s no way to mitigate this.”

She notes that the situation is sharply different for investors in stocks and shares where the first £20,000 a year can be held in a stocks and shares ISA, protecting you from capital gains tax and dividend tax. 

You can sell up and buy at any time without creating a tax bill, and take income completely free of tax. You can also hold stocks and shares within a SIPP, giving you tax relief on the way in, and tax-free growth along the way.

If you hold stocks and shares outside an ISA or SIPP, you can realise gains along the way, so you can take advantage of your annual capital gains tax allowance of £3,000 a year. You can also use share exchange (or Bed and ISA), or Bed and SIPP, to move more of your assets into a tax-efficient environment every year. 

“It’s a totally different world to the tax-crunch of property investment” explains Coles, who adds that property investors are also clobbered with the cost of buying and selling, charges for maintenance and repairs, void periods and the cost of using a lettings agency if required.

Property also flies in the face of the importance of diversification, she warns. 

“In many cases this is a leveraged investment, and often people will only have one or two properties. It means their risk is massively focused on the value of those properties – not to mention it’s the same asset class as their other main asset – their own home. 

“And property performance varies dramatically, not just from area to area, but from street to street, and according to the individual property. If you end up with subsidence, it can be a catastrophe.”