Property Tax Shake-Up: What Landlords in South London Need to Know

The news in the property world this week has been all about the leaks coming from Whitehall that Chancellor Rachel Reeves has asked her Treasury team to look at how property taxation can be reformed. Reports seem to be settling on suggestions that Stamp Duty and council tax could be replaced by new national property taxes in a move that could reshape the market.

So what’s being proposed, and how might it play out for the lettings market?

A New National Property Tax

One idea rising to the surface has come from a report by the thinktank Onward, which calls for a “fairer property tax” – something that such esteemed bodies as the Institute for Fiscal Studies (IFS) and the International Monetary Fund (IMF) (and, indeed, many estate agents!) have long argued for.

Under one suggested model:

• Owners of homes worth over £500,000 would pay an annual tax of 0.54% of the property’s value
• For homes worth more than £1 million, the rate would rise to 0.81%

The tax would be levied on the seller, not the buyer, marking a significant step away from the current Stamp Duty system. Another suggestion is that, although dressed as ‘annual’, it would be calculated and charged to the seller at the point of sale

On paper, that perhaps sounds like a simplification. But being at the point of sale, what happens in situations where property values have fallen over time? How might one find the funds to pay the tax due, in order to move?

As ever, the detail matters – and that is why rumours are one thing, but a clear pathway to this mooted reform is far from being in sight.

 

How Will Stamp Duty Reform Affect Landlords and Second Homes

One thing that has become clearer over the past 48 hours or so is that the proposals as they currently stand do not remove the Stamp Duty surcharge on second homes. At present, landlords buying an additional property pay stamp duty in the following way:

 

Property Purchase Price	Stamp Duty Rate
Up to £125,000	5%
The next £125,000 (from £125,001 to £250,000)	7%
The next £675,000 (from £250,001 to £925,000)	10%
The next £575,000 (from £925,001 to £1.5 million)	15%
Any amount above £1.5 million	17%

 

This surcharge looks set to remain in place, meaning landlords will continue to face extra costs when acquiring rental stock.

What we can’t see yet is whether there will be any consideration made for landlords who are both buying and selling at the same time. Will a landlord selling a rental property face the new annual property tax and pay the surcharge on their next purchase? Or might there be some offsetting – perhaps even within the same tax year? It is something that might make a difference to many landlords’ tax liabilities – especially portfolio and corporate landlords who might buy and sell in volume.

Market Impact: Opportunities and Risks

If these changes are introduced, we may well see a short-term rush of sellers aiming to offload higher-value properties in favour of smaller homes before the new system takes effect. That could create buying opportunities for landlords, particularly those looking to step up into larger or higher-yielding properties.

Longer term, many are suggesting that sellers will simply raise their asking prices and hold out for increased sale prices in order to offset any new ‘sellers tax’. If that were the case, landlords – just like any other future buyer – might end up paying proportionately more than they would today — not only because of the second-property surcharge, but also because property values themselves would be inflated to accommodate a sale tax.

The danger of course is that fewer landlords may be willing or able to buy into the market, which in turn could mean reduced rental supply and inevitably, higher average rents. Somehow, it feels like the burden of these in-essence noble reforms will fall most heavily on those that ostensibly need the most help.

Other Options for Stamp Duty Reform

At the same time as this is going on, a separate conversation is happening with regards to how Stamp Duty itself is paid.

A petition brought by Andrews Property Group is calling for buyers to be able to spread their Stamp Duty costs over two to five years, as an alternative to the current system which requires buyers to find the entire sum within 14 days of completion.

That petition has already attracted more than 2,600 signatures at the time of writing and is gaining momentum, now being championed by the likes of Rightmove and TV’s Phil Spencer.

For landlords as much as general market buyers, this kind of flexibility would make cashflow management easier, especially if refurbishment is needed and when letting costs are taken into account, costs that often hit at the same time as purchase.

Our Take

From a landlord’s perspective, at the moment any reform of property tax is currently just speculation – and simply because a petition gains signatories doesn’t mean an awful lot.

When it comes to the Andrews Property Group proposal, a move away from upfront Stamp Duty could make transactions more fluid, freeing up opportunities in the short term. But, what would the outcome be if buyers could not find the money 2 to 5 years later?

Layering a new property tax on sellers instead of buyers, as put forward by the thinktank Onward, would remove a portion of stamp duty – but as yet it fails to address the surcharge on landlords – which, as property prices increase, risks making buy-to-let less attractive.

Demand for rental homes still far outstrips supply, and so anything that deters investment in the private rented sector ultimately feeds back into higher rents for tenants.

When it comes to tax reform, the devil will no doubt be in the detail. For now, landlords should keep an eye on the Chancellor’s next moves to track how changes to both Stamp Duty and property taxation could affect their portfolios.

We’ll surely be watching, so stay tuned to our blogs and our social media to keep up to date as this story progresses.

Frequently Asked Questions

Would landlords still pay the SDLT second homes surcharge under the new rules?
Yes. From 1 April 2025, the surcharge on additional properties rose to 5%. This is added to each standard SDLT band, giving effective total ‘band rates’ (5%, 7%, 10%, 15% and 17% depending on purchase price).

Could the proposed reforms increase rents?
Potentially, yes. If property sellers raise asking prices to cover the new “seller’s tax” and landlords face higher acquisition costs, fewer investors may buy rental homes. Reduced supply almost always feeds into higher average rents.

Will landlords pay both the new property tax and Stamp Duty at the same time?
That part remains unclear. The Treasury hasn’t confirmed whether landlords who sell one property and buy another within the same tax year could be charged twice. Much will depend on the final details of the legislation.