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Buy to Let Stamp Duty
When you're buying a second property that isn't your main residence, for example, as a buy to let or holiday home, you'll pay additional Stamp Duty Land Tax.
You'll be liable for additional Stamp Duty when you buy a property that isn't your main residence, for example:
- a second home or holiday home
- a buy to let property (whether it's an additional property or one without any tenants in place)
- a conversion into self-contained flats (even if there are already tenants in place) You'll still pay Stamp Duty Land Tax when you:
- Purchase a share of a property that already has tenants in place, such as a buy to let flat or maisonette - become a non-resident landlord of a UK property
- If you're an overseas buyer, you will need to pay extra stamp duty in England and Northern Ireland.
If you're looking to buy additional residential properties as a first-time landlord or to expand your investment property portfolio, we can help.
Our expert team offer free whole of market mortgage advice, allowing you to compare buy to let mortgages online and get a decision in principle in minutes.
What is stamp duty?
Stamp duty is a type of buildings transaction tax that you pay when you buy a property. The amount you pay varies on factors such as:
- The property price
- Whether this is your first and main residence
- Whether you own more than one property
- Where the property is located, as the rules vary between England, Scotland, Northern Ireland and Wales.
Stamp duty is paid to HMRC by the buyer after the sale has been completed. The seller then pays stamp duty to HMRC.
Do I pay additional stamp duty if I own a buy-to-let?
Yes, if you're already a homeowner and the property you're buying isn't your main home, you'll pay additional stamp duty.
The exception to this rule is for people buying a buy to let as a first-time buyer, meaning, they are not already a homeowner.
This is a relatively niche situation as most BTL mortgage lenders will prefer existing homeowners.
How much stamp duty will I pay on a buy to let property?
Assuming you're already a homeowner, you pay 3% extra stamp duty in comparison to buying your first property.
The amount of stamp duty you'll pay will vary based on the price of the property that you're buying.
The more expensive and higher-banded your property, the higher stamp duty rates you'll pay on that portion of the purchase price.
First-time buyers who are purchasing a buy to let property will pay the same rate of stamp duty as those who are buying their first residential home.
In September 2022, changes were announced to the way in which Stamp Duty is calculated. These changes will mean that, for most people, the amount of Stamp Duty they pay will be lower than it would have been under the old rules.
The tables below show the new rates of Stamp Duty:
Stamp duty in England and Northern Ireland (from September 2022)
Portion of Property Price | Tax Rate (Primary residence) | Tax Rate (Additional Property) |
|---|---|---|
Up to £250,000 | 0% | 3% |
Between £250,001 to £925,000 | 5% | 8% |
Between £925,001 to £1.5 million | 10% | 13% |
More than £1.5 million | 12% | 15% |
First Time Buyer Stamp duty in England and Northern Ireland (from September 2022)
Portion of Property Price | Tax Rate (Primary residence) |
|---|---|
Up to £425,000 | 0% |
Between £425,000 to £625,000 | 5% |
More than £625,000 | If the price is over £625,000, you cannot claim the relief. |
Stamp duty in Wales (from 10th October 2022)
(Unlike England, Wales has no special threshold for first-time buyers.) | ||
|---|---|---|
Portion of Property Price | Tax Rate (primary residence) | Tax Rate (Additional property) |
Up to £225,000 | 0% | 4% |
Between £225,000 to £400,000 | 6% | 10% |
Between £400,000 to £750,000 | 7.5% | 11.5% |
Between £750,000 to £1.5 million | 10% | 14% |
More than £1.5 million | 12% | 16% |
Stamp duty in Scotland
Portion of Property Price | Tax Rate (primary residence) | Tax Rate (Additional Property) |
|---|---|---|
Up to £145,000 (£175,000 for first-time buyers) | 0% | 4% |
Between £145,000 to £250,000 | 2% | 6% |
Between £250,001 to £325,000 | 5% | 9% |
| £325,001 to £750,000 | 10% | 14% |
| Over £750,000 | 12% | 16% |
How do I know if my property is classed as an additional property?
This depends on how many homes you own, not how many mortgages you have.
So, if you've already got a home in your name, regardless of whether it is mortgaged or not, the additional stamp duty tax will be applicable regardless of what type of mortgage you have on your new property.
Can you add stamp duty to your buy to let mortgage?
No, it's not possible to add Stamp Duty onto your mortgage.
This is a common question for buy to let mortgages, and this means you will need to budget for the additional stamp duty as part of your overall business plan.
What happens if I don't pay stamp duty?
You have 14 days to complete the Stamp Duty Land Tax return and make payment in full.
If you fail to pay, HMRC will charge you interest, so the longer you fail to pay the more you'll pay overall.
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Can you claim back stamp duty on a buy to let?
Yes, if you sell your second property within 3 years, you could be eligible for a refund on the stamp duty bill.
When you sell your second property, Stamp Duty will be refunded if the property was sold during the first three years of ownership.
Who is exempt from paying Stamp Duty?
There are situations where you will not have to pay.
- no money or other payment changes hands for a land or property transfer
- property is left to you in a will
- property is transferred because of divorce or dissolution of a civil partnership
- you buy a freehold property for less than £40,000
- you buy a new or assigned lease of 7 years or more, as long as the premium is less than £40,000 and the annual rent is less than £1,000
- you buy a new or assigned lease of less than 7 years, as long as the amount you pay is less than the residential threshold or non-residential threshold of SDLT
- you use alternative property financial arrangements, for example to comply with Sharia law
Buy to Let Stamp duty surcharge for overseas buyers
For overseas buyers of buy to let property in England and Northern Ireland, they will need to pay a surcharge of an additional 2% on top of the 3% second property rate.
The surcharge applies to all purchases of residential homes in the UK by individuals who are not residents in the UK for tax purposes.
This additional stamp duty surcharge applies to both freehold and leasehold properties.
The surcharge does not apply for non-residential property, or property bought in Scotland or Wales.
The additional rate means that second home stamp duty rates have increased to 5%. This surcharge came into effect on 1st April 2021 and is intended to extend the existing stamp duty regime.
What properties are excluded from buy to let stamp duty?
There are certain properties that are excluded from buy to let stamp duty.
For example, if you're buying a mobile home, a caravan, or a houseboat, you will not be liable for stamp duty - even if you own additional property.
If the buy to let property you're buying is less than £40,000, you'll also be exempt from paying stamp duty. For example, if you're buying a studio flat or bedsit that's below the threshold, then no stamp duty will be due for this purchase.
Buy to let Stamp Duty tip
If you're looking to buy a buy to let property, then it pays to plan ahead and make sure that you are accounting for all the costs above the property price - including stamp duty.
It's important to speak to an expert in order to plan your purchase and help you get the right mortgage for your specific needs.
Find a buy to let mortgage now
If you're looking to get started as a first-time landlord, or if you're a portfolio landlord who is keen to expand their business, then it's important to speak to an expert who can help you find the right mortgage for your specific needs.
Connect with a buy to let expert now, and they'll be able to give you some mortgage advice on finding the right deal for your situation.
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