"The stamp duty surcharge was designed to moderate buy-to-let and second-home demand, but the longer-term effect has been to entrench additional-property purchases as a core source of stamp duty revenue"
- Louisa Sedgwick - Paragon Bank
Buy-to-let and second home transactions now account for the majority of stamp duty receipts in over half of English local authorities, up from under a quarter when the stamp duty surcharge was first introduced, according to Paragon Bank analysis of government data.
In the 2024/25 financial year, income from higher-rate additional dwelling (HRAD) transactions accounted for at least half of total stamp duty receipts in 164 English local authorities, up from 62 in 2016/17, a 164% increase. As a share of all English councils, that figure rose from 22% to 56%.
The analysis points to a significant structural shift in the tax base, with HRAD stamp duty transactions playing an increasingly dominant role in funding receipts across large parts of England.
Where buy-to-let and second homes now dominate stamp duty
Many of the councils where buy-to-let and second home purchases account for the highest proportion of stamp duty receipts are not traditional holiday or second home hotspots, but large urban authorities in the Midlands and North, suggesting the transactions are driven primarily by buy-to-let activity.
In 8% of local authorities, additional property purchases now account for three-quarters of total stamp duty receipts. HRAD transactions made up 97% of total receipts in Kingston upon Hull and 92% in Sandwell in the West Midlands. Manchester, Salford and Wolverhampton now derive three-quarters or more of their stamp duty receipts from additional property purchases.
Regionally, 93% of local authorities in Yorkshire and the Humber generate at least half of stamp duty receipts from HRAD transactions, with 92% in the North East and 89% in the North West. The proportion is considerably lower in the south, with 33% of local authorities in the East of England and 34% in the South East reaching that threshold.
A 3% stamp duty surcharge was introduced in April 2016 to cool buy-to-let and second home demand, later extended to 5% in the 2024 Autumn Budget. While transaction volumes have softened in some markets, the receipts data suggest the policy has also increased reliance on higher-rate purchases as a source of stamp duty revenue.
"The stamp duty surcharge was designed to moderate buy-to-let and second-home demand, but the longer-term effect has been to entrench additional-property purchases as a core source of stamp duty revenue," said Louisa Sedgwick, managing director of mortgages at Paragon Bank (pictured).
"A decade on, the receipts data points to a more complicated outcome. In many parts of England, these transactions now account for a much larger share of stamp duty revenues than they did at the outset."
"The figures suggest that additional-property purchases have become an increasingly important component of the stamp duty tax base, but there is only so far that landlords can go."
"They have already been hit with an increase to the surcharge in 2024, and the impact of the policy has been to pivot transactions to northern regions, where property is typically cheaper. The danger moving forward is that we create a two-tier market, with uneven investment across the country, particularly in the south, which could lead to stock shortages and rental inflation."
