Making sense of all the new stamp duty changes and what it means for investors

Stamp Duty Land Tax (SDLT) is a tax levied when you purchase a residential property in the UK over a certain value. The amount you pay is defined by the overall value of the property and is calculated based on increasing portions of that overall price.

During the initial phases of the Coronavirus pandemic, a Stamp Duty holiday was introduced by the government to stimulate demand and give the housing market a welcome boost. This holiday took the form of a temporary reform to Stamp Duty rates and saved buyers £15,000 on a purchase which goes up to the tax-free limit. This gave buyers confidence and supported the growth of the market even through the most challenging of times.

In the period up to the 30th June 2021, buyers would pay no Stamp Duty at all on property valued up to £500,000. This is now being tapered off with steadily reducing tax relief rates until the end of September, when Stamp Duty will return to pre-pandemic levels.

Until 1st October, the Stamp Duty rates due on UK property are as follows:

Property or lease premium or transfer valueSDLT rate
Up to £250,000Zero
The next £675,000 (the portion from £250,001 to £925,000)5%
The next £575,000 (the portion from £925,001 to £1.5 million)10%
The remaining amount (the portion above £1.5 million)12%


For example, if in August 2021 you buy a house for £275,000, the SDLT you owe will be calculated as follows:

  • 0% on the first £250,000 = £0
  • 5% on the remaining £25,000 = £1,250
  • Total SDLT = £1,250

The same purchase after the holiday ends will cost the buyer £3,750 in Stamp Duty costs once the rates return to normal:

  • 0% on the first £125,000 = £0
  • 2% on the next £125,000 = £2,500
  • 5% on the remaining £25,000 = £1,250
  • Total SDLT = £3,750

Additionally, buy to let investors face an additional Stamp Duty levy of 3% on top of the regular rate when they purchase an additional property to let out to a tenant. With this in mind, what does this mean for investors in the future when the Stamp Duty holiday ends?

The short answer is: investors should not be put off by a small rise in Stamp Duty.

By focussing on a slightly increased initial cost, investors will miss the far more significant returns that are on offer. As mentioned previously, the Stamp Duty holiday was put in place to give people confidence and increase demand for housing – and it worked exactly as intended.

That increased demand is the key point to bear in mind, as a spike in demand means that house prices are going up and the capital appreciation on offer is increasing. A quick look at the statistics confirms this.

According to the Office for National Statistics and the Land Registry, as reported by the BBC, the average UK house price increased by 10.2% over the year first year that the Stamp Duty holiday was in place – the fastest annual rate of growth for 14 years. Needless to say, that rise in property prices is more than enough to counteract any additional Stamp Duty fees incurred when the tax rate returns to its pre-pandemic level.

But will this growth continue? Again, the news for investors is positive. All indications are that the UK residential market will continue to boom in the coming years thanks to a lack of available supply, low interest rates and schemes like Help to Buy which are designed to further boost demand.

Consequently, Savills has upgraded its forecasts for the coming years as of August 2021 and is now predicting even higher levels of growth than it had previously. The firm projects the UK’s prime housing markets will grow 9.0% in 2021 and 21.5% by 2025, reflecting a year of robust house price growth.

The Stamp Duty holiday played a major role in ensuring the continued health of a thriving property market. As the tax relief programme is gradually wound down, with the return to pre-pandemic rates in October 2021, it means that investors will return to paying slightly more up front, but in a favourable housing market where the overall profits have grown enormously – and are set to continue doing so in the years to come.

Buy to let investment is a medium- to long-term prospect at its best, and investors should be encouraged by the effects of the Stamp Duty holiday on their portfolios. This is an ideal time to invest in UK property and our team are ready and waiting to advise and assist you in your next investment – get in touch today to find out more about our outstanding buy to let opportunities in the UK’s most profitable markets >> https://www.opulentinvest.com/contact-us/

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