Stamp duty on a buy-to-let property is typically higher than on a residential property, so this is one cost you will need to consider before purchasing a rental home.
In this guide, we will consider the costs attributed to buy-to-let stamp duty and let you know if you’re exempt from paying it. We will also provide a stamp duty calculator so you can work out the cost before you apply for a buy-to-let mortgage.
How much stamp duty do I pay on a buy-to-let property?
When making a property purchase in England and Northern Ireland, you have to pay Stamp duty land tax (SDLT) to the HMRC. This applies whether you are buying a property as your main residence or a buy-to-let property (unless you are exempt from the charge).
The current rate of SDLT starts at 0% on the first £250,000 of the property value and goes up to 12% on properties worth £1.5 million or more.
With a buy-to-let property, you may have to pay additional stamp duty, depending on whether the following apply.
You currently own at least one other property
If you own more than one property after purchasing your buy-to-let investment – which you likely will do if you have already bought your own home to live in – you will be subjected to a minimum 3% SDLT surcharge on top of your standard stamp duty bill.
The rate you are charged will depend on the property price of your second purchase. The table below highlights the stamp duty rate for additional properties based on property values.
Buy-to-Let stamp duty rates in England and Northern Ireland
|PURCHASE PRICE OF PROPERTY||STAMP DUTY RATE||STAMP DUTY RATE FOR ADDITIONAL PROPERTIES|
|Up to £250,000||0%||3%|
|£250,001 to £925,000||5%||8%|
|£925,001 to £1.5 million||10%||13%|
|Over £1.5 million||12%||15%|
Example: Using the above information as a guide, if you were to purchase a second property for £300,000, for example, you would have to pay £11,500 in stamp duty. That’s £9,000 more than somebody with no other properties.
Buy-to-Let stamp duty for non a UK residents
Overseas-based buyers of residential properties in England and Northern Ireland are required to pay a surcharge of 2% on top of the normal stamp duty rates. This is on top of the additional stamp duty surcharge required for a buy-to-let.
So, if you’re a non-UK resident and you own a property abroad, the following stamp duty rates will apply to you.
|Stamp duty rates||Portion of the property value|
|5%||The first £250,000 of the property value|
|10%||The next £675,000 of the property value (i.e. £250,001-£950,000)|
|15%||The next £575,000 of the property value (i.e. £950,001-£1.5 million)|
|17%||Any value above £1.5 million|
Example: Based on the information we have provided, if you were to buy a property worth £300,000, you would have to pay £17,500 in stamp duty.
Stamp duty for first-time buyers
If you’re a first-time buyer, you won’t need to pay the 3% surcharge that is incurred on second homes as you don’t already own a property.
However, you will still need to pay the standard stamp duty rates on properties worth over £425,000.
Example: On a property worth less than £625,000, first-time buyers would need to pay:
- 0% on the first £425,000
- 5% on the next £200,000 (i.e. £425,001 – £625,000)
Stamp duty calculator buy to let
To calculate how much tax you will need to pay, use the stamp duty calculator below.
How does this differ for buy-to-lets in Scotland and Wales?
Tax payable on properties in Scotland and Wales is similar to that in England and Northern Ireland but the term ‘stamp duty’ isn’t used.
The tax payable on properties in Scotland is called Land and Buildings Transaction Tax (LBTT) and in Wales, the tax payable on property purchases is called Land Transaction Tax (LTT).
As with stamp duty, these taxes are charged at higher rates for buyers purchasing additional properties.
You can check out the rates below, including the Additional Dwelling Supplement (ADS), which is charged on second homes.
Stamp duty Scotland
|Up to £145,000||0%||3%|
Stamp duty Wales
|Up to £180,000||0%||4%|
|Over £1.5 million||12%||16%|
Can you add stamp duty to a buy-to-let mortgage?
It is possible to add stamp duty to a buy-to-let mortgage but if you want to save money, it is advisable to pay stamp duty upfront. This is because adding stamp duty to your mortgage will increase the amount you need to borrow and the amount of interest that will be charged on your loan.
As such, you will be required to make a larger deposit (which is usually 20-25% of a property’s value for a BTL mortgage), and you will have to make higher monthly repayments on your mortgage.
Are there any stamp duty exemptions for buy-to-let properties?
Whether or not you have to pay the higher rate of SDLT generally depends on how many properties you own.
If you only own one property, then you don’t have to pay the surcharge.
But if you buy an additional property to your first property, you will usually have to pay SDLT at a higher rate.
We say ‘usually’ because you can avoid paying stamp duty at the increased rate if the following apply.
- You are exempt from stamp duty if the total property price is £40,000 or less.
- Caravans, house boats, and mobile homes are not currently liable for stamp duty, regardless of price
- If you’re a first-time buyer, you won’t have to pay buy-to-let stamp duty rates (but you will have to pay standard home mover stamp duty rates on buy-to-let properties over £40,000)
- Stamp duty isn’t payable on inherited properties but if you later purchase a second property, you will need to pay the additional stamp duty rate (you might also be subject to inheritance tax)
- If you buy two or more properties in the same transaction, you can claim stamp duty land tax relief
- Charities qualify for stamp duty relief if they on a property purchase for charitable purposes
- If you are part of an unmarried couple and one of you already owns a property, you can avoid the additional rates if the party that doesn’t own a home is named on the mortgage and property deeds of the investment property (this doesn’t apply for those who married or in a civil partnership)
There may be other stamp duty exemptions so get in touch with a member of our team if you would like to know more.
Can you claim back stamp duty for a buy-to-let?
If you’re hoping to claim back buy-to-let stamp duty as a business expense on your tax return, we’re afraid you’re out of luck!
However, there are other instances where you may be able to claim back the money you have paid.
- You may be able to claim a stamp duty refund if you sell your main residence within 3 years of purchasing your buy-to-let. You will need to file your stamp duty return with HMRC.
- If you paid a stamp duty surcharge on a property with a building adjoined to it, such as a granny flat, you may be able to claim the money back from the HMRC
- If you sell your buy-to-let, you may be able to reduce your capital gains tax bill by deducting the stamp duty you originally paid.
Speak to a buy-to-let specialist
Stamp duty is just one of the expenses that you will need to consider when applying for a buy-to-let mortgage.
To learn more, get in touch with our team. We specialise in buy-to-let mortgages so as well as finding you a fantastic mortgage deal, we will also explain the various costs that come with your buy-to-let purchase, such as product fees and stamp duty.
As we are a FEE-FREE mortgage broker, you won’t have to pay us a penny for our services, so not only will we find ways to reduce the total cost of your mortgage but we will also give you advice and support at no extra cost.
To learn more, get in touch with us today by using our contact form, WhatsApp, or by ringing us at 03300884407.
Yes, if you’re purchasing an investment property as a limited company, you will still be subjected to the same SDLT rates as anybody else owning second properties.
For stamp duty purposes, this is the place where you and your family spend most of your time. If this is your only property, you will pay stamp duty at standard rates. You will need to pay additional stamp duty if you purchase a second property on top of your current property, such as a holiday home or a buy-to-let.
Yes, if your main residence is a property overseas but you want to buy an investment property in the UK, then you will need to pay the surcharge on the whole cost of the property.
Married couples and people living as civil partners will have to pay second home stamp duty if one person in the couple already owns one property and they want to buy a second property with a joint mortgage.