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New buy-to-let stamp duty rates apply from today

Investors and second home buyers will pay 3% extra

Buy-to-let stamp duty

Buy-to-let stamp duty applies on second properties costing over £40,000

A new rate of stamp duty for people investing in buy-to-let property and second homes comes into force today.

Anyone who buys an additional property for over £40,000 as a buy-to-let investment, second home or holiday home will have to pay an extra 3% under the new buy-to-let stamp duty rules.

This surcharge will have a significant effect on the cost of buying an additional property, with the stamp duty payable on a £275,000 home rising from £3,750 to £12,000.

Stamp duty reform is the latest in a series of policies brought in by the government to cool the buy-to-let sector. 

  • Property investment is a minefield, but you can get impartial, personal advice on your mortgage options by calling Which? Mortgage Advisers on 0808 252 7987

New buy-to-let stamp duty rates

To find out how much stamp duty you’ll pay under the new rules, you can check out the table below or use our buy-to-let stamp duty calculator

Buy-to-let stamp duty rates
Portion of property price Old stamp duty rate New stamp duty rate
£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%

a If total property price is £40,000 or less

b If total property price is over £40,000

LBTT in Scotland

If you live in Scotland, you’ll pay Land and Buildings Transaction Tax (LBTT) rather than stamp duty. New LBTT rates are also coming into force today for buy-to-let and additional properties. Check out our guide to LBTT to find out more.

Buy-to-let stamp duty: an example

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)

Find out more: what is stamp duty? – check our our video about how stamp duty works

Buy-to-let stamp duty exemptions

If you’re buying a property that costs less than £40,000, you won’t need to pay the additional charge. Caravans and houseboats are exempt from stamp duty altogether.

The government has also responded to the concerns of some home movers who were worried about having to pay the additional charge if they bought their new home before managing to sell their old one. 

While people in this situation will have to pay the extra 3% in stamp duty at the time of buying their new home, they can now claim the difference back if they sell their previous home within 36 months (three years) of moving. The government originally said this would have to be done within 18 months.

Investing in a buy-to-let property

Property investment has been a very popular and profitable industry in the last few years, with housing offering an attractive alternative for savers in a time of low interest rates.

This hasn’t escaped the attention of the Bank of England (BOE), which has been watching the sector closely due to fears of the market overheating. The Bank proposed new limits just this week on buy-to-let mortgage lending.

While property investment can be profitable, it’s not a straightforward game. In addition to finding the right property to invest in and obtaining a buy-to-let mortgage, you’ll also need to learn about the responsibilities that you’ll face as a landlord. The guides listed below will help you understand the pros and cons of buy-to-let investment.

Find out more: use our interactive house price map to see the areas where prices are rising – and falling

More on this:

Your home may be repossessed if you do not keep up repayments on your mortgage.

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