Stamp Duty on Buy to Let Soars as Landlords Bankroll the Tax Take

Higher-rate stamp duty on second homes and buy-to-let properties generated £5.4bn for the Treasury in 2024-25 - a 19% jump year on year - and now drives the majority of stamp duty income in more than half of English councils, according to analysis by specialist lender Paragon Bank.

How Reliant Are Councils on Landlord and Second-Home Buyers?

In 2024-25, higher-rate additional dwelling (HRAD) transactions accounted for at least half of total stamp duty receipts in 164 English local authorities, according to Paragon Bank's research. That figure was just 62 local authorities in 2016-17 when the surcharge was first introduced - meaning the number has grown by 164% in eight years.

Expressed as a share of all councils, 56% of English local authorities now collect more stamp duty from second-home and buy-to-let purchases than from standard residential transactions, compared with just 22% when the surcharge was launched.

The concentration is sharpest in the north. According to the Paragon Bank analysis, 93% of local authorities in Yorkshire and the Humber generate at least half their stamp duty receipts from HRAD transactions. The figure is 92% in the North East and 89% in the North West. In Kingston upon Hull, 97% of stamp duty receipts came from additional dwelling purchases in 2024-25, up from 68% in 2016-17.

The south tells a different story. Only 33% of local authorities in the East of England and 34% in the South East hit the 50% threshold, reflecting higher property values that push more standard transactions into meaningful tax bands.

What the Surcharge Rate Means for Your Liability

The rate is important to understand here. From 31 October 2024, the HRAD surcharge rose from 3% to 5% on every pound of the purchase price - including the nil-rate band. That change, confirmed in the Autumn Budget 2024, contributed to HRAD receipts rising £870m in a single year, per HMRC figures.

To put that in concrete terms: on a property worth £250,000 bought as a buy-to-let in England, the total SDLT liability breaks down as follows. You pay 5% on the full £250,000 (the surcharge applies to every slice), plus standard rates on top. The standard SDLT on a £250,000 residential purchase since April 2025 is £2,500 (0% on the first £125,000, 2% on £125,001 to £250,000). Add the 5% surcharge on the full £250,000, which equals £12,500. Your total liability is therefore £15,000 - six times what a standard residential buyer would pay on the same property. Use the free Property Filter stamp duty calculator to run your own numbers before committing.

Note: these rates apply under SDLT in England and Northern Ireland. Scotland uses Land and Buildings Transaction Tax (LBTT) with its own additional dwelling supplement, and Wales applies Land Transaction Tax (LTT). Speak to your accountant about the rules in your jurisdiction.

A total of 211,700 transactions attracted the HRAD surcharge in 2024-25, with the surcharge element alone generating £2.8bn, per HMRC's Annual Stamp Tax Statistics.

The Policy Risk Investors Should Note

The Paragon Bank data reveals something beyond a tax revenue story. The Treasury has become structurally dependent on buy-to-let and second-home buyers to fund stamp duty receipts - particularly in lower-value markets in the north and Midlands. That dependence cuts both ways.

Any future policy that suppresses additional-property purchases - whether a further surcharge increase, new lettings restrictions, or changes to allowable mortgage deductions - would directly hollow out local stamp duty income in those areas. The government faces a structural conflict: taxing landlords heavily whilst needing them to keep transacting.

For investors, the implication is real. If you are reviewing your investment strategy in the current environment, factor in that the surcharge is no longer a temporary corrective measure. It is now a permanent, load-bearing part of the public finances. Reversal is unlikely; increases are possible.

If you are considering holding property through a limited company structure, the same surcharge applies - but the tax treatment of mortgage interest differs. Read more about structuring and business systems for property investors before deciding. And as ever, speak to your accountant before acting.

Key Takeaways

• HRAD receipts reached £5.4bn in 2024-25, up 19% on the prior year (HMRC Annual Stamp Tax Statistics).

• The additional dwelling surcharge is now 5% on every slice of the purchase price, effective 31 October 2024.

• 164 English councils - 56% of all local authorities - now collect more stamp duty from landlords and second-home buyers than from standard purchases.

• On a £250,000 buy-to-let in England, total SDLT is approximately £15,000 versus £2,500 for a standard purchase.

• The northern regions are most exposed: 93% of Yorkshire and Humber councils breach the 50% HRAD threshold.