If you’re considering buying a property, regardless of whether you’re a first-time buyer, you’re buying a second home/ a holiday home, or you’re buying to let, you need to consider Stamp Duty.

What exactly is Stamp Duty? And how does Stamp Duty apply to you if you’re a landlord? We’ve got you covered – read on to learn all about Stamp Duty on buy-to-let properties.

What is Stamp Duty?

Stamp Duty is a form of tax, also known as Stamp Duty Land Tax (SDLT). This form of tax is charged on properties and land in England and Northern Ireland over a certain price.

The amount of Stamp Duty is based on bands, just like Council Tax bands. It is payable on both freehold and residential properties, whether you’re a first-time buyer, you’re moving home, or you’ve purchased a second property.

However, if you’re a first-time buyer, you won’t be required to pay Stamp Duty unless the property costs over £300,000. If you’re buying a second property, you’ll be required to pay an extra 3% Stamp Duty on any property that costs over £40,000.

If you have inherited a property, then you won’t need to pay SDLT. However, if you purchase another property, you’ll likely be required to pay the additional rate as you’ll be in ownership of two properties.

Ultimately, the amount of Stamp Duty you pay depends on whether you’re a first-time buyer, you’re a UK resident, you’re buying an additional property, and whether the property is for residential use or non-residential use.

You’ll need to pay Stamp Duty within 14 days of purchasing a property – historically, you had 30 days to pay Stamp Duty, but this was reduced back in 2019.

The majority of people submit their Stamp Duty Land Tax returns through a conveyancer or property solicitor to streamline the process. You may be able to claim relief and lower the amount of tax you pay – for example, if you’re purchasing more than one property or you’re buying a property for the first time.

Stamp Duty on Buy to Let

According to HMRC, there are roughly 2.5 million buy-to-let landlords in the UK. If you already own properties, you shouldn’t worry about Stamp Duty. However, if you’re planning on purchasing another property, then you need to know about Stamp Duty and how much you’ll need to pay.

If you’re purchasing a second property to let out to tenants, you’ll be required to pay an additional 3% (minimum) on Stamp Duty if the property is over £40,000. You’ll be required to pay this if you’re married or in a civil partnership and your partner owns another property, too.

If you’re buying a property as a company as opposed to as a person/ individual, then you’ll be required to pay the additional Stamp Duty even if the company doesn’t already own any properties.

However, certain properties are exempt from additional SDLT charges – for example, mobile homes, caravans, and houseboats.

Rates

The rate of Stamp Duty you pay depends on a number of factors – and the additional Stamp Duty is paid on top of the amount of Stamp Duty you pay on other properties. This means that you pay more on a buy-to-let property than you would usually.

Although you wouldn’t usually pay Stamp Duty on properties less than £125,000, you’ll pay 3% if you’re purchasing an additional property. The Stamp Duty rate increases as the property price increases, meaning that if the property costs between £125,001 to £250,000, you’ll pay 2% and 5% on top of that.

This increases as the price increases – if the property costs over £1.5 million, the regular rate is 12% – and the additional Stamp Duty is 15%.

This means that if you plan on purchasing a property to let out to tenants in England, you’ll pay £7500 in Stamp Duty. However, if you were purchasing this as a residential property, it would be £6,000 cheaper.

Is it Worth It?

Stamp Duty can be costly, which is why it’s so important to do your research before committing to purchasing a property. If you want to learn more about the pros and cons of buying to let, check out this blog post. 

We always recommend speaking to a Mortgage Broker to discuss your options and to weigh up the pros and cons of buying to let. This is something we can help with at LTC mortgages – contact us today to find out more about how we can help you.