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Landlord's Guide To Buy-to-let Stamp Duty

Our complete guide explains the ins and outs of stamp duty, including information on buy-to-let stamp duty for landlords.

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Breaking into the buy-to-let property market is a lucrative business, if you can afford it. When thinking about whether to try your hand at becoming a landlord it’s important to factor in all of the costs, from the price of the property you hope to rent out to the cost of landlord insurance to ensure you are well protected against the risks (you can also learn more about landlord insurance from our guide, here!).

There are some additional fees however that can be overlooked, and a major one that can be very costly is buy-to-let stamp duty. So, what is buy-to-let stamp duty and how much will you have to pay?

First, let’s define standard stamp duty so we can understand the difference between this and the buy-to-let version, as these are not the same!

What is stamp duty?

In a nutshell, stamp duty (known fully as 'Stamp Duty Land Tax') is a type of tax you pay if you purchase a residential property or piece of land in England, Scotland, Wales or Northern Ireland. How much you pay, and whether you are indeed required to pay in the first place is determined by a number of thresholds.

These threshold bands relate to the cost of your property, with more expensive properties equating to a higher band of stamp duty tax that is payable.

How much stamp duty do I have to pay?

The standard rates of stamp duty differ from buy-to-let stamp duty, which we will look at in a moment. However, regardless of how many properties you own you’ll still need to pay the standard stamp duty on your main place of residence. We have listed the thresholds below for your reference, so you can see how these compare to the thresholds for buy-to-let stamp duty.

Standard rates from 1 July 2021 to 30 September 2021

Property or lease premium or transfer value

Stamp duty tax rate (%)

Up to £250,000

0%

£250,001 to £925,000 (the next £675,000)

5%

£925,001 to £1.5 million (the next £575,000)

10%

Above £1.5 million (any remaining amount)

12%

Stamp Duty rates and thresholds are liable to change, so remember to keep yourself up to date with the current figures. In fact, they are due to change in October, and you can see the changes for yourself below.

Standard rates from 1 October 2021

Property or lease premium or transfer value

Stamp duty tax rate (%)

Up to £125,000

0%

£125,001 to £250,000 (the next £125,000)

2%

£250,001 to £925,000 (the next £675,000)

5%

£925,001 to £1.5 million (the next £575,000)

10%

Above £1.5 million (any remaining amount)

12%

As you can see, from October there will be a new band introduced, so take this into consideration if you are thinking about purchasing a buy-to-let property after this time. The bands can seem confusing to some, so we've included an example below to break it down for you.

Example:

Imagine you purchased a property in July of 2021 at a cost of £300,000. The amount of stamp duty you pay can be calculated in the following way:

  • First 250,000 = 0%
  • The remaining £50,000 will be taxed at 5% = 2,500
  • Total amount due = £2,500

There are plenty of stamp duty tax calculators available online, too, such as HMRC’s which you can access here.

Buy-to-let stamp duty rates

Landlords are required to pay an additional 3% for stamp duty on their property, compared to standard rates.

You are required by law to pay higher rates of stamp duty tax if you own additional properties, for example, in the case of buy-to-let landlords. Again, how much you will pay is determined by when you purchased your property, and how much for.

Since 2016, landlords have been required to pay an additional 3% for stamp duty compared to the standard rates. You can find the rates for buy-to-let stamp duty below:

Buy-to-let rates from 1 July 2021 to 30 September 2021

Property or lease premium or transfer value

Stamp duty tax rate (%)

Up to £250,000

3%

£250,001 to £925,000 (the next £675,000)

8%

£925,001 to £1.5 million (the next £575,000)

13%

Above £1.5 million (any remaining amount)

15%

Buy-to-let rates from 1 October 2021

Property or lease premium or transfer value

Stamp duty tax rate (%)

Up to £125,000

3%

£125,001 to £250,000 (the next £125,000)

5%

£250,001 to £925,000 (the next £675,000)

8%

£925,001 to £1.5 million (the next £575,000)

13%

Above £1.5 million (any remaining amount)

15%

Example:

Let’s say you have plans to purchase a buy-to-let property for £500,000 in November 2021. If the sale is completed in this month, the stamp duty you will be required to pay can be calculated as follows:

  • First £125,000 = 0%
  • The next 125,000 will be taxed at 5% = £6,250
  • The remaining £200,000 will be taxed at 8% = £16,000
  • Total stamp duty to pay = £22,250

As you can see, the cost of stamp duty can really add up — especially when you consider your initial cost of buying the property and other associated costs such as landlord insurance or renovations!

Taking all of this into consideration, you may find that becoming a landlord is simply more money than it’s worth, so it’s important to do your research prior to fully committing so you don’t get caught out along the way and end up paying more than you bargained for.

Are there any exceptions for Buy-to-let stamp duty?

There are some circumstances which mean you do not need to pay buy-to-let stamp duty. We've outlined the key ones below, so be sure to make note.

You do not need to pay the higher rate of buy-to-let stamp duty if you...

  • Use your new property as your main residence
  • Sold or gave away your previous main residence before you purchased your new property (note: also applies if this occurred on the same day)
  • Transfer ownership, or part ownership, to your spouse so long as no other parties are involved

You do not need to pay the higher rate of buy-to-let stamp duty if your property...

  • Is worth less than £40,000
  • Is a mixture of residential and non-residential (for example, a corner shop with a small flat above it)
  • Is movable, for example a caravan, mobile home or houseboat unless it has become a permanent fixture
  • Lease is for 7 years or less from the date it was granted
  • Lease is owned by someone else and has more than 21 years left

FAQs

You are required to pay your stamp duty land tax within 14 days of the 'effective date' you purchased the property.

There is a 2% surcharge on residential properties that have been bought by non-UK residents on or after 1 April 2021, and this applies to properties purchased in England and Northern Ireland.

This surcharge is added on top of all other Stamp Duty rates, including the higher rates for landlords with buy-to-let properties!

Emily Bunt

Emily is a psychology graduate from the University of Kent, currently working as a Data Analyst at NimbleFins focused on insurance content for SMEs. Prior to this she worked in market research at Kantar, investigating consumer behaviour and decision making, as well as in a supporting role in the field of mental health. Learn more at LinkedIn.

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