Stamp Duty is back in the news as the Treasury floats ideas ahead of what promises to be a testing Autumn Budget. The Treasury is reported to be considering a range of measures, including applying tax to the sale of homes over £500,000.
Of course, we all know the Government trails ideas to test market reaction and what we hear from the Chancellor at the Dispatch Box in the Autumn is very likely to be different to what we have read this week. We all remember the unwelcome, and surprising, rabbit Rachel Reeves pulled out of a hat last Autumn, when her Budget included an increase in the Stamp Duty surcharge, throwing the plans of thousands of landlords into disarray.
However, speculation has impact. People naturally act if they suspect policy change may adversely affect them, and we could see a slew of expensive homes coming onto the market if people believe they will be taxed. Investors need certainty to plan, and even the suggestion of change can distort behaviour.
Stamp Duty holidays and surcharges have long been used as levers to stimulate or subdue the housing market. But these interventions often have unintended consequences. The buy-to-let sector, which plays a vital role in providing rental housing and supporting regional economies, has been particularly vulnerable to these shifts.
At Paragon Bank, we’ve seen how previous stamp duty changes have reshaped landlord behaviour. Since the original surcharge on second homes was introduced in 2016, buy-to-let purchases in Greater London have dropped by 66%. Investors are increasingly favouring northern regions, where property prices, and therefore tax liabilities, are lower.
While this redistribution of investment may support regional growth, it’s not purely market-driven, it’s a reaction to tax policy. That’s not sustainable. London remains a high-demand rental market, and suppressing investment there has exacerbated supply shortages and driven up rents at a rate exceeding the national average.
The Treasury’s new proposal, though not yet finalised, adds another layer of complexity. If buy-to-let properties are excluded from the seller-side tax and remain under the current buyer-side stamp duty regime, landlords could face a bifurcated system that complicates transactions and planning. If they’re included, the impact on portfolio strategy, cash flow and long-term returns could be significant.
Moreover, policy shifts like these often create timing distortions. Changes in Stamp Duty take months to show up in mortgage approvals and housing transaction data. This lag means lenders are often flying blind, unable to forecast demand or risk accurately. It also leads to spikes and troughs in activity that make it harder for lenders to manage resources and for landlords to make informed decisions.
Examples of this were seen during the Stamp Duty holiday across 2020 and 2021, which drove buy-to-let purchases to levels not seen since those days before the surcharge was introduced. More recently, Q1 mortgaged buy-to-let purchases were the strongest since pre-pandemic as landlords rushed to beat the end of the latest Stamp Duty tweaks introduced in the dying days of the Conservative Government.
What the sector needs is not more reactive tinkering but a clear, progressive Stamp Duty policy that supports long-term investment and housing stability. This means engaging with lenders and landlords to understand the real-world impact of tax changes, modelling outcomes robustly and avoiding knee-jerk decisions that prioritise headlines over housing health.
Stamp Duty should be a lever for strategic planning, not a blunt instrument for short-term stimulus. A well-designed, predictable framework would allow lenders to price risk more accurately, landlords to invest with confidence and policymakers to support regional development without destabilising the market.
In short, it’s time to move beyond disruption and towards a Stamp Duty policy that reflects the complexity and importance of the buy-to-let sector. The housing market, and the millions who depend on it, deserve nothing less.
Louisa Sedgwick is Managing Director of Mortgages at Paragon Bank
