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Stamp duty

Buy-to-let stamp duty

By Marie Kemplay

Article 3 of 3

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Buy-to-let stamp duty

Use our buy-to-let stamp duty calculator to find out how much stamp duty you'll pay on a buy-to-let property or second home.

The new buy-to-let stamp duty rules mean that anyone buying an additional property, including buy-to-let landlords and those buying second homes and holiday homes, will have to pay an extra 3% in stamp duty.

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Stamp duty for buy-to-let investors and second homeowners

The new second home and buy-to-let stamp duty rates are tiered, just like residential stamp duty rates and income tax. Each tier, or portion of the property price, is now subject to an extra 3% stamp duty on top of the usual rate paid by those buying a home they are intending to live in.

You can check out the old and new stamp duty rates in the table below, and calculate how much you'll now have to pay using our buy-to-let stamp duty calculator, top right.

Buy-to-let stamp duty rates
Portion of property price Old stamp duty rate New stamp duty rate (as of 1 April 2016)
£0-£40,000a 0% 0%
£0-£125,000b 0% 3%
£125,001-£250,000 2% 5%
£250,001-£925,000 5% 8%
£925,001-£1.5m 10% 13%
£1.5m+ 12% 15%
Table notes: Rates also apply to second homes and holiday homes. aIf total property price is £40,000 or less. bIf total property price is over £40,000.

Take a look at this example to see how it works:

  • Property price: £275,000
  • Portion 1: £0 - £125,000 - 3% tax (£3,750)  
  • Portion 2: £125,000.01 - £250,000 - 5% tax (£6,250)
  • Portion 3: £250,000.01 - £275,000 - 8% tax (£2,000)
  • Total paid: £287,000 (£12,000 tax)

Buy-to-let stamp duty: who is exempt?

If you're married or in a civil partnership and either partner already owns a property, you'll have to pay the additional stamp duty regardless of how many properties you yourself own.

If the purchase is not made by an individual (eg the buyer is a company rather than a person), the additional stamp duty will apply regardless of how many properties the company owns.

So what properties are excluded from buy-to-let stamp duty?

If the total price paid for the property is under £40,000 you won't need to pay any stamp duty at all.

If you're buying a caravan, mobile home or houseboat, you'll also be exempt from stamp duty, regardless of the purchase price and whether it's going to be your main residence.

If you exchanged contracts on or before 26 November 2015, and complete your purchase on or after 1 April 2016, you will be exempt from paying the higher rate of stamp duty.

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. The claim must be made within three months of the sale.

Holding financial interest in a property

It's unlikely that additional stamp duty will apply if you have inherited a small share (50% or less) in an additional property, or you hold a financial interest in one as part of a partnership or as a beneficiary of a trust.

However, there are exceptions, so you should declare any financial interests such as these to your solicitor.

Stamp duty must be paid within 30 days of buying a property. In most cases, you'll transfer the money to your conveyancer, who will make the payment on the day you complete your purchase.

Initially, yes, but you can claim this back if you sell your original property within 36 months (three years). You'll need to make the claim within three months of the sale.

Your 'main residence' is the place that you and your family spend most of your time living in. To determine your main residence, HMRC will look at factors including where you work, where your children go to school and where you're registered to vote.

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 considered as one person for stamp duty purposes.

It depends. If you already own a property in the UK as your main residence and are simply moving house (ie, selling your current property and buying a new one), you won't have to pay the additional charge. If, however, you own a property overseas and are buying your first UK home, you'll have to pay the surcharge as it will be counted as a second home.

Stamp duty only applies to properties in the UK, so you won't have to pay it when buying a home abroad.

It depends. If you're gifting your child money for a deposit or acting as a guarantor on their mortgage, you won't need to pay. If your name is going on the mortgage as a joint owner, you'll technically own two properties so will need to pay 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.

  • Finding a buy-to-let mortgage can be a confusing process, but you can get impartial advice on the right product for you by contacting Which? Mortgage Advisers on 0808 252 7987
  • Last updated: January 2017
  • Updated by: Stephen Maunder

 

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