Buy To Let Stamp Duty

A question that is asked a lot of from property investors is what is the total due on Stamp Duty for Buy to Let properties to understand exactly what they need to budget for.


Stamp Duty is calculated as a percentage of the value of the property and is worked out on a tiered basis.


If you have a case you would like to discuss, we have extensive knowledge in Stamp Duty for Buy to Let properties and can provide up-to-date information to make sure you are equipped for your next property investment purchase.



The Following Topics Are Covered Below:


Stamp Duty For First-Time Investors


Understanding in Depth Stamp Duty For Landlords


Finding a Reliable Stamp Duty Calculator


Scottish Buy To Let Stamp Duty


Stamp Duty Relief


Claiming Stamp Duty Expenses


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Stamp Duty For First-Time Investors


Buy To Let Stamp Duty For First Time Buyers
HMRC Website Source: Rates for First-Time Buyers

For First-Time Buyers, the good news is if it's your first property and it's valued under £500,000 then the is an exemption from paying Buy To Let Stamp Duty on the first £300,000, and thereafter charged at 5%.



Understanding Stamp Duty For Landlords


People who already have a primary residence would like to purchase a second property to gain rental income.


However, there will be a higher rate for additional dwellings which is applied to purchases that complete on or after April 2016.



Second Home Stamp Duty
Source: HMRC Second Home Stamp Duty

For Non-UK Residents, with effect from April 2021, these rates are increased by a further 2%


The higher rate does not apply to certain people, property and transactions and you may be able to qualify for relief. For example, if you use your new property as your main home, if the property is worth less than £40,000 or if the property type is mixed-use (like a shop with a flat above it).


For more information visit the HMRC Website which is updated regularly so it's important to check its publications on changes.


Finding a Reliable Stamp Duty Calculator


The HMRC Calculator is the most reliable source to work out the SDLT payable for most transactions and provides clear and concise information for investments in additional properties.


Scottish Buy To Let Stamp Duty


In Scotland, investors pay a similar duty called Land and Building Transaction Tax (LBTT), which is a very similar tax to that in England but has different rates which you can find below for first-time buyers.


The Additional Dwelling Supplement came into force on the 1st of April 2016 and is charged at 4%, payable on the total purchase price if the price is £40,000 or more. For up-to-date information, follow the Scotland Government website




Stamp Duty Relief and Claiming Expense


Depending on your circumstances, you may be eligible to claim relief as a Buy To Let Landlord.


There are Stamp Duty guidelines listed on the HMRC Website that informs Buy to Let landlords on ways they can potentially save tax.


For example, a few examples are listed below and sourced from the HMRC Website


1. SDLT Relief for Multiple Dwellings


You may be able to claim relief if you buy more than one dwelling where a transaction or a number of linked transactions include freehold or leasehold interests in more than one dwelling


To work out the rate of tax HMRC charges for multiple dwellings:

  • Divide the total amount paid for the property by the number of dwellings

  • Calculate the tax based on this figure

  • Multiply this amount of tax by the number of dwellings


2. An Employer Buys An Employee's House


Some jobs and contracts include the provision of a residential property for the employee. In this case, the employer is technically acting as a landlord. They can claim relief against Stamp Duty provided the following conditions are met:

  • The property is a primary residence by the employee

  • The residency begins no earlier than two years before the purchase

  • The property sits within half a hectare of land

  • The relocation requires a house move and the purchase of the property

  • The property is purchased at a fair market value


3. When the Landlord is registered as a social landlord


A registered social landlord can claim tax relief in the following circumstances:

  • The majority of the board members of the registered social landlord are tenants living in properties from the social landlord

  • The seller of the property is a qualifying body such as a local council.


4. When a Property Developer Buys A Property


Sometimes, a developer purchases a property from a new resident who is, in turn, buying a residence from the developer. In this case, the developer would not be required to pay Stamp Duty on the purchase of their new resident's old home.

The following conditions apply to the resident selling their previous property:

  • They have lived in the property as their main home during the two years leading up to the sale

  • They are purchasing a new residence from the developer

  • The new property will become their new primary home or only residence


Claiming Stamp Duty Expenses


Unfortunately, Stamp Duty is not a claimable expense for landlords to offset against their revenue for tax purposes. Certain types of expense are tax-deductible, such as:

  • Property maintenance and repair costs

  • Management costs

  • Utilities

  • Any staffing costs, such as wages for a property manager

There are other ways to apply for tax relief - for example, if you sell your property at a profit, then the Stamp Duty paid can be dedicated from the profit when calculating how much Capital Gains Tax you need to pay.


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Disclaimer:



This article is intended to provide a general understanding of the topic. The contents should not be treated as advice.


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