The 5% SDLT surcharge and the property tax squeeze ahead

If you buy a second property or buy-to-let in England today, you pay a 5% Stamp Duty Land Tax surcharge on top of the standard rates. That is up from 3% just last year. On a £500,000 purchase, the surcharge alone adds £25,000. On a £1 million acquisition, it is £50,000. These are not rounding errors.

The standard SDLT nil-rate band sits at £125,000. First-time buyers retain a higher threshold at £300,000. But for portfolio landlords and developers acquiring additional properties, the 5% surcharge means every deal needs to work harder on the numbers.

This is not happening in isolation. Dividend tax rates rose by 2% from April 2026. If you extract profits from a property company via dividends, you are paying more on every pound. The basic rate is now 10.75%, and the higher rate is 35.75%. For directors of SPVs, the effective cost of profit extraction has increased meaningfully.

It gets worse next year. Property income tax rates are set to rise by a further 2% from April 2027. And from April 2028, a new mansion tax on properties valued above £2 million will be collected alongside council tax. The government has laid out a three-year programme of escalating property taxation.

For developers, the question is no longer whether individual deals stack up — it is whether your entire portfolio strategy accounts for a rising tax burden over the next three years. A deal that works at today's rates may not work at 2028's rates.

The writing-down allowance rate reduction from 18% to 14% hits commercial property fit-outs and refurbishments. If you are converting office space, fitting out retail units, or renovating commercial buildings, the annual tax relief on qualifying plant and machinery within those properties has decreased.

Holding structure reviews are more important than ever. The relative attractiveness of personal versus corporate ownership shifts with each tax change. For some portfolios, incorporating into an SPV still makes sense despite the higher dividend tax. For others, the numbers no longer justify the complexity. The answer depends on your specific situation.

Stertha Advisory works with property investors and developers across London and the UK. We do not sell properties — we make sure the ones you buy, hold, and sell are structured to keep the maximum return in your pocket. Book a consultation and let us look at the full picture.