Analysis of government data by Paragon has revealed that second home and buy-to-let transactions now account for the majority of stamp duty in more than half of English local authorities.
It emerged that this was an increase from less than a quarter when the stamp duty surcharge was first introduced.
The 3% stamp duty surcharge came into effect in April 2016 to cool demand for owner-occupied and second homes and was expanded to 5% in the 2024 Autumn Budget.
Revenue from higher rate stamp duty transactions (HRAD) accounted for at least half of total stamp duty revenue in 164 English local authorities, up from 62 in 2016/17, an increase of 164%.
As a share of all English councils, this rose from 22% to 56%.
Paragon found that it was even more common in some regions.
Many of the councils where buy-to-let and second-home purchases represent the highest percentage of stamp duty income are not traditional holiday or second-home hotspots, but large urban authorities in the Midlands and the North, suggesting that transactions are being driven by buy-to-let purchases. The higher tax generates the majority of stamp duty revenue in 93% of local authorities in Yorkshire and 92% in the North East.
HRAD transactions accounted for 97% of total stamp duty receipts in Kingston upon Hull and 92% in Sandwell in the West Midlands.
Locations such as Manchester, Salford and Wolverhampton now generate three-quarters or more of their stamp duty receipts from purchasing additional property.
Louisa Sedgwick, mortgage director at Paragon Bank, said: “The stamp duty surcharge was intended to moderate demand for owner-occupied and second homes, but the longer-term effect is that the purchase of additional property has become a significant source of stamp duty income.
“Ten years on, the revenue data points to a more complicated outcome. In many parts of England, these transactions now represent a much larger share of stamp duty revenues than they did at the outset.
“The figures suggest that purchasing additional property has become an increasingly important part of the stamp duty tax base, but landlords can only go so far.
“They have already been hit with a markup increase in 2024 and the impact of the policy has been to shift transactions to the northern regions where property is generally cheaper.
“The danger going forward is that we create a two-tiered market, with uneven investment across the country, especially in the south, which could lead to inventory shortages and rent inflation.”