March 2026 marks 10 years since the ‘second home’ stamp duty surcharge reshaped the economics of investing in residential property.
Introduced on 1 April 2016 for additional property purchases in England and Scotland, it marked the start of a shift between the tax treatment of owner-occupiers and investors.
Whilst it was initially set at an extra 3% on top of existing stamp duty rates in England, the surcharge was later increased to 5% in October 2024.
There is a similar 5% surcharge in Wales, while in Scotland the equivalent rate is now 8%.
What changed – and why it mattered
A new analysis by lettings agency Hamptons shows how the surcharge dramatically increased the cost of purchasing an investment property.
Today, a £350,000 buy-to-let in England attracts a £25,000 stamp duty bill for an investor, compared with £7,500 for a mover and £2,500 for a first-time buyer.
By design, the policy tilted the market away from landlords.
But despite accounting for a smaller share of all transactions, by the 2024/25 tax year, surcharge payers accounted for 48% of all residential stamp duty revenue.
A decade on: 2.2 million ‘missing’ rental homes
These higher taxes, alongside other regulatory and demographic changes, had a profound effect on the size of the private rented sector.
Hamptons’ analysis suggests that had the private rented sector continued to grow at pre-2016 rates, there would be an additional 2.2 million households renting privately across Great Britain.
Instead, the number of rented households has effectively plateaued.
Despite demand rising with population growth, only around 5.2 million households rent privately today, compared with the 7.4 million that might have been expected had pre-surcharge trends continued.
Proportionally, this means 18.0% of households now rent – far from the 25.6% that would have mirrored the 1960s-style levels implied by earlier growth rates.
The surcharge achieved its core objective: fewer purchases by investors. But fewer landlord purchases, combined with some investors choosing to sell, have resulted in 25.4% fewer homes available to rent in February 2026 than in February 2016.
Investor activity falls as taxes rise
In the 12 months before the 3% stamp duty surcharge was initially introduced in England and Scotland on 1 April 2016, investors rushed to beat the deadline, with 16.5% of homes bought by landlords, above the previous five-year average of 14.5%.
However, in the decade since the surcharge was introduced, the average share of purchases made by landlords has fallen to 11.8%, reaching a low of 10.8% so far in 2026, following the 2024 surcharge increase from 3% to 5%.
The share of purchases bought by landlords has also fallen after subsequent stamp duty surcharge hikes across England, Scotland and Wales.
This decline in investor appetite has had several knock-on effects – not only for tenants and rental affordability, but also for housebuilding investors, who have traditionally helped de‑risk development schemes by buying off‑plan.
Share of homes bought by an investor
| 12 months prior to the surcharge | 2026 | Change | |
| London | 16.4% | 8.5% | -7.9% |
| South East | 15.1% | 10.5% | -4.6% |
| South West | 14.7% | 7.3% | -7.4% |
| East of England | 14.6% | 8.1% | -6.5% |
| East Midlands | 18.1% | 15.3% | -2.8% |
| West Midlands | 21.2% | 14.6% | -6.6% |
| North East | 23.3% | 29.2% | 5.9% |
| North West | 16.9% | 13.4% | -3.5% |
| Yorkshire & Humber | 15.7% | 13.8% | -1.9% |
| Scotland | 17.0% | 6.1% | -4.1% |
| Wales | 15.7% | 7.0% | -8.7% |
| GB | 16.5% | 10.8% | –5.7% |
Source: Hamptons
