Stamp Duty for Buy-to-Let Properties (+ Free Stamp Duty Calculator)
Buy to let stamp duty tax is slightly higher than on your primary residence. here's what you need to know with a free stamp duty calculator.
Reporting & Tax
Written by
Ben Luxon
PUBLISHED ON
Oct 30, 2024
If you're planning to buy an investment property in the UK, you need to factor in the cost of Buy to Let Stamp Duty Tax. Stamp Duty as a tax payable when you purchase a property or land over a certain value, and the rates vary depending on the property's purchase price and your circumstances. In this article, we discuss the rules, rates, and exemptions related to Stamp Duty Tax in the UK and offer a free stamp duty calculator.
Important: In the Autumn Budget 2024 the government introduced increases to the Higher Rates for Additional Dwellings (HRAD) surcharge on SDLT from 3% to 5%, effective from October 31, 2024.
What is Stamp Duty?
Stamp Duty Land Tax (SDLT), commonly known as Stamp Duty, is a tax levied by the UK government on property purchases over a certain value. The tax is payable by the buyer, and the amount varies based on the purchase price and the property type.
Stamp duty on buy-to-let property is slightly higher than on your primary residence. We outline the exact stamp duty rates for 2023 below.
Calculate stamp duty on property purchases including buy-to-let stamp duty and stamp duty for non-uk residents using our comprehensive stamp duty calculator.
Why is there a higher Stamp Duty Tax on Buy-to-Let Properties?
The UK government introduced the additional 3% Stamp Duty Tax for buy-to-let properties and additional homes in April 2016. The aim of taxing second homes and investment properties at a higher rate than primary residences was to cool the housing market and discourage property speculation.
The rationale behind this tax is that people who own multiple properties can have an unfair advantage over first-time buyers. A lower tax then would allow investors to purchase multiple properties more easily reducing the number of houses available for first-time homebuyers and driving up property prices. This tax then seeks to level the playing field.
Stamp Duty Tax Exemptions
There are some exemptions to Stamp Duty Tax that you should be aware of:
First-time buyers: If you're a first-time buyer purchasing a property worth up to £500,000, you'll pay no stamp duty on the first £300,000 and 5% on the remaining portion up to £500,000.
Shared ownership: If you're purchasing a shared ownership property, you'll only pay stamp duty on the portion of the property you're buying, rather than the full purchase price.
Transfers between spouses: If you're transferring a property to your spouse, you won't have to pay Stamp Duty Tax.
Unmarried couples and those purchasing jointly: If you're buying a property with someone you live with, and one of you already owns a property but the other doesn't, the only way to avoid paying higher stamp duty rates is for the person who doesn't own a property to buy the property on their own. This means being the only person named on the mortgage and property deeds. Those purchasing a property jointly will be treated as a single entity for stamp duty - so the same rules apply as for married couples.
Moving house: If you buy a new home before selling your old one, you will have to pay the higher stamp duty rate. However, you can claim this back if you sell your original home within 36 months (three years) of buying the new one. See the FAQs below for more details.
Conclusion
Stamp Duty Tax is an important consideration when buying a property in the UK. By understanding the rules, rates, and exemptions related to this tax, you can better plan your property purchase and avoid any surprises. Remember you can use the Stamp Duty Calculator in the article above to calculate how much the stamp duty tax on your property investment will come to so you can avoid any nasty surprises down the line.
Payment of the stamp duty is required within 30 days of purchasing a property. Typically, you’ll make the payment to your solicitor, who will then make the payment on the day of your property completion.
Initially, as this is technically a second property, yes. However, you can claim this back if you sell your original property within 36 months (three years).
The place where you and your family primarily reside is referred to as your 'main residence'. HMRC considers various factors such as your workplace, your children's school, and your voter registration to determine your main residence.
No. As long as you're not married or in a civil partnership, you can buy a property solely in your own name without paying the surcharge.
Yes. Married couples are seen as one person for stamp duty purposes.
The answer varies based on the specific circumstances. If your current property in England or Northern Ireland is your primary residence and you are only relocating (i.e. selling your current property and purchasing a new one), you will not be subject to the additional charge.
However, if you’re buying your first home in England or Northern Ireland and already own a property overseas, the surcharge will apply as it will be considered a second home. As of April 2021, foreign buyers purchasing properties in England and Northern Ireland are obligated to pay a 2% surcharge.
If you're gifting your child money for a deposit or acting as a guarantor on their mortgage then the property won’t count as a second property and you won't need to pay.
However, if your name is going on the deeds as a joint owner, then you will technically own two properties so will need to pay the surcharge.
It is possible to get a joint borrower, sole proprietor (JBSP) mortgage where you can be named on the mortgage but not the property deeds - this would mean that you could avoid paying the surcharge.
Stamp duty isn't payable on inherited properties, but if you inherit a home and then buy another one before selling it you'll usually need to pay the stamp duty surcharge on the property you're buying.
If, however, you inherit a share of 50% or less of a property and buy your next home more than 36 months later, it won't be considered an extra property.
As long as the annex is bought in the same transaction as the main residence, is within the grounds of the main home and is worth no more than a third of the overall value of the property, you won't have to pay the extra charge.
Initially, yes. When you buy the new property you'll have to pay the 3% surcharge, but you can claim this back if you sell your stake in the old property within 36 months.
There are no stamp duty exemptions when purchasing a buy-to-let property as a limited company.
However, if you already own a buy-to-let property and decide to set up a limited company, you'll essentially have to pay stamp duty again as you'll have to 'sell' your property to your limited company.
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