March 2026 marks 10 years since the ‘second home’ stamp duty surcharge reshaped the economics of investing in residential property.
Introduced on 1 April 2016 for additional property purchases in England and Scotland, it marked the start of a shift between the tax treatment of owner-occupiers and investors.
Whilst it was initially set at an extra 3% on top of existing stamp duty rates in England, the surcharge was later increased to 5% in October 2024.
There is a similar 5% surcharge in Wales, while in Scotland the equivalent rate is now 8%.
To mark the anniversary, lettings agency Hamptons has undertaken a detailed analysis.
What changed – and why it mattered
\The surcharge dramatically increased the cost of purchasing an investment property.
Today, a £350,000 buy-to-let in England attracts a £25,000 stamp duty bill for an investor, compared with £7,500 for a mover and £2,500 for a first-time buyer.
By design, the policy tilted the market away from landlords.
But despite accounting for a smaller share of all transactions, by the 2024/25 tax year, surcharge payers accounted for 48% of all residential stamp duty revenue.
A decade on: 2.2 million ‘missing’ rental homes
These higher taxes, alongside other regulatory and demographic changes, had a profound effect on the size of the private rented sector.
Hamptons’ analysis suggests that had the private rented sector continued to grow at pre-2016 rates, there would be an additional 2.2 million households renting privately across Great Britain.
Instead, the number of rented households has effectively plateaued.
Despite demand rising with population growth, only around 5.2 million households rent privately today, compared with the 7.4 million that might have been expected had pre-surcharge trends continued.
Proportionally, this means 18.0% of households now rent – far from the 25.6% that would have mirrored the 1960s-style levels implied by earlier growth rates (chart 1).
The surcharge achieved its core objective: fewer purchases by investors.
But fewer landlord purchases, combined with some investors choosing to sell, have resulted in 25.4% fewer homes available to rent in February 2026 than in February 2016.
Investor activity falls as taxes rise
In the 12 months before the 3% stamp duty surcharge was initially introduced in England and Scotland on 1 April 2016, investors rushed to beat the deadline, with 16.5% of homes bought by landlords, above the previous five-year average of 14.5%.
However, in the decade since the surcharge was introduced, the average share of purchases made by landlords has fallen to 11.8%, reaching a low of 10.8% so far in 2026, following the 2024 surcharge increase from 3% to 5%.
The share of purchases bought by landlords has also fallen after subsequent stamp duty surcharge hikes across England, Scotland and Wales.
This decline in investor appetite has had several knock-on effects – not only for tenants and rental affordability, but also for housebuilding investors, who have traditionally helped de‑risk development schemes by buying off‑plan.
Share of homes bought by an investor
| 12 months prior to the surcharge | 2026 | Change | |
| London | 16.4% | 8.5% | -7.9% |
| South East | 15.1% | 10.5% | -4.6% |
| South West | 14.7% | 7.3% | -7.4% |
| East of England | 14.6% | 8.1% | -6.5% |
| East Midlands | 18.1% | 15.3% | -2.8% |
| West Midlands | 21.2% | 14.6% | -6.6% |
| North East | 23.3% | 29.2% | 5.9% |
| North West | 16.9% | 13.4% | -3.5% |
| Yorkshire & Humber | 15.7% | 13.8% | -1.9% |
| Scotland | 17.0% | 6.1% | -4.1% |
| Wales | 15.7% | 7.0% | -8.7% |
| GB | 16.5% | 10.8% | –5.7% |
Source: Hamptons
Tighter rental supply pushes rents above inflation
For long-term tenants and those unable or unwilling to buy, the surcharge has been less favourable. Rents across Great Britain have risen 44.1% over the last decade, outpacing CPI inflation, which rose at 39.9% over the same period.
Rents have risen by an average of 4.0% a year since the surcharge was introduced, up from 3.0% during the five preceding years.
This suggests the surcharge has added around 1% to annual rental growth over the last decade – equivalent to an additional £70 per month.
First-time buyers are the main beneficiaries – but not all have gained
First-time buyers have been the main beneficiaries of the second home stamp duty surcharge.
They now make up a record share of purchasers and are significantly less likely to find themselves competing with a landlord.
Share of offers made by first-time buyers where an investor is also bidding
| 12 months prior to the surcharge | 2026 | Change | |
| London | 38% | 21% | -17% |
| South East | 28% | 15% | -13% |
| South West | 22% | 10% | -12% |
| Eastern | 29% | 18% | -11% |
| East Midlands | 26% | 22% | -4% |
| West Midlands | 22% | 22% | 0% |
| North East | 17% | 17% | 0% |
| North West | 18% | 24% | 6% |
| Yorkshire & Humber | 23% | 26% | 3% |
| Scotland | 15% | 18% | 3% |
| Wales | 9% | 13% | 4% |
| GB | 26% | 19% | -7% |
Source: Hamptons
In the 12 months before the surcharge was introduced, more than a quarter (26%) of first-time buyers faced competition from an investor when submitting an offer (table 2).
Today, that figure has fallen to less than a fifth (19%), reflecting both fewer investor purchases and the rising first-time buyer demand.
This reduction in competition has been most pronounced across the South of England, particularly in London and the South East.
But in more affordable regions – the North West, Yorkshire & Humber, Scotland and Wales – competition from landlords has increased as investors have gravitated towards higher‑yield, lower‑cost markets.
This is also reflected in bidding behaviour.
In the 12 months running up to the surcharge’s introduction, the average investor offer was 0.8% below the average first-time buyer offer.
Today, higher tax bills mean the average investor bid is 2.0% below that of a first-time buyer, as investors struggle to make deals stack up.
Around three-quarters of the “missing” rented homes – roughly 1.4 million – are now lived in by owner-occupiers, broadly matching the government’s figures for growth in homeownership over the same period.
However, the surcharge has also likely suppressed housebuilding. The remaining 25% of ‘lost’ homes (around 800,000 properties) have not been built.
These are new units that might previously have been purchased by investors, often one to two years off-plan, which significantly helps with the developers’ cash flow.
