What do I need to know about buy-to-let stamp duty?

The cost of purchasing a buy-to-let property may be going down in some respects thanks to the recent mortgage rate cuts, but with UK house prices on the up, savings are being spent elsewhere. Alongside the cost of buy-to-let mortgage deposits and monthly repayments, the initial outlay of your property purchase and additional fees also needs to be budgeted for.

Stamp Duty Land Tax (SDLT) is one such property buying cost that is paid by would-be and already established UK landlords looking to start or expand their portfolios. While first time buyer stamp duty rates mean generous discounts, buy-to-let investors have no such luck. So, how much will you pay in stamp duty on your buy-to-let purchase?

How much stamp duty will I pay as a UK landlord?

The rates for a single residential property are calculated on a sliding scale. If the property for example is worth up to £250,000, buyers will pay no SDLT in accordance with the latest thresholds and rates. The next £675,000 of the property’s value will see stamp duty charged at 5%. While properties valued up to £1.5 million will have to pay stamp duty of 10% on the portion from £925,001. The remaining amount (above £1.5 million) is charged at 12%.

The rates above apply to the purchase of a single residential property. Any transaction involving additional properties valued above £40,000, such as buy-to-let purchases, will incur additional stamp duty. This is charged at 3% in addition to the residential rates.

Do these rates differ from stamp duty for second homes?

The same rates apply for those looking to purchase additional properties for personal use, such as second or holiday homes. Again, this applies to properties valued above £40,000. It does not apply to purchases of caravans, mobile homes, houseboats, or properties that will be used as main residences.

What if my second property becomes my main residence?

If the status of your second property changes – i.e. you choose to adopt this as your main residence at a later date and go onto sell your previous main residence – you may be entitled to a refund. But, as the HomeOwners Alliance details, it’s all about timing:

“If there’s a delay between buying your new main residence and selling your previous main residence, you will probably have to pay the higher rates of Stamp Duty as you’ll now own two properties. However, if you sell your previous main home within three years of buying your new home you might be able to apply for a refund of the higher tax rate you paid when you purchased your new home.”

I want to purchase multiple buy-to-lets, what rates apply then?

Special stamp duty rates apply if you wish to purchase six or more residential properties in a single transaction. The rate you will pay however will differ if the properties are leasehold or freehold. You can find the latest higher SDLT rates here.