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By Pete Mugleston | Mortgage Advisor

Pete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.

Updated: 3rd September 2020*

We receive lots of enquiries from landlords and aspiring landlord about how Stamp Duty is charged on a buy to let (BTL) property.

Stamp Duty is charged via a tiered system, which can make it difficult to quickly calculate the amount you will need to pay.

This can put some potential landlords off from moving forward with a buy to let mortgage, simply because they are unsure about how much it could cost them in fees.

The good news is that the advisors we work have extensive knowledge in Stamp Duty and buy to let properties.

They can provide you with clear and concise information, ensuring that you are well equipped to proceed with your buy to let mortgage.

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How much Stamp Duty Land Tax (SDLT) will I pay on a buy to let in 2019?

This will depend on a number of factors, such as whether you’re a first-time buyer or if you already own a home and are purchasing a second property to rent it out.

How much BTL Stamp Duty do I pay as a first-time buyer?

As part of the government’s efforts to support homeownership, in 2015, it was announced by then-chancellor George Osborne that there would be changes to Stamp Duty.

For buy to let, first time buyers, this is great news as if their first property is valued at under £500,000, they will be exempt from paying the new buy to let Stamp Duty on the first £300,000. Thereafter, they will be charged 5%.

How much Stamp Duty do I pay on a second property if I want to rent it out?

Many people already own a home but wish to invest in a buy to Let property for rental income.

However, from the 1st April 2016, anyone purchasing a second property, including buy to let, will be required to pay an additional Stamp Duty.

See the table below to learn more about how the changes in Stamp Duty can affect the amount of tax you pay on the purchase of a second property.

House price thresholdStandard Stamp Duty RateBTL/Second Property Stamp Duty Rate
Up to £125,0000%3%
£125,001 – £250,0002%5%
£250,001 – £925,0005%8%
£925,001 – £1.5 Million10%13%
£1.5 Million +12%15%

Where can I find a buy to let Stamp Duty calculator?

HMRC has a reliable Stamp Duty calculator on its website which you can use here.

It can be used to work out SDLT payments on the following property types…

  • BTLs for first-time buyers
  • Properties that are replacing a main residence
  • Additional property purchases (including BTL)
  • Residential or non-residential (including BTL)
  • Freehold or leasehold (including BTL)

If you’ve used HMRC’s Stamp Duty calculator and are still unsure how much you should be paying, make an enquiry and the expert brokers we work with will clear up any confusion.

Buy to let Stamp Duty in Scotland

In April 2015, Stamp Duty was abolished in Scotland and replaced with land and buildings transaction tax (LBTT).

Although many of the fundamental features of each tax system are similar, there are differences in the rates that are charged.

Scottish first-time buyers and Buy to Let tax rates

First-time buyers who are investing in a buy to let property will pay the standard rate of LBTT in Scotland as follows:

Portion of property pricePercentage

Scottish second-time buyers and buy to let tax rates

Scottish buyers that currently own property will be charged LBTT as follows:

Portion of property pricePercentage
Properties worth less than £40,0000%

How to avoid buy to let Stamp Duty

There are some incidences where Stamp Duty is not payable, for example, if you buy a caravan, mobile home or houseboat, which could be a cheaper alternative, especially if you are a first time buy to let buyer on a budget.

Of course, first-time buyers are exempt from paying Stamp Duty on the first £300,000 of a property if it is valued under £500,000, even if the property they are purchasing has a buy to let mortgage.

Transactions, where no payment is made, are also exempt from Stamp Duty charges. This type of scenario might occur if a property is transferred in relation to a will or after a divorce.

Can I get buy to let Stamp Duty relief?

Depending on your circumstances, it may be possible for you to claim relief from Stamp Duty as a buy to let landlord.

In fact, HRMC has set out Stamp Duty guidelines informing buy to let landlords about the potential ways they may be eligible for tax relief. Head over to the government department’s official website for more information.

When there are multiple dwellings

If you buy more than one dwelling and the transaction include a freehold or leasehold agreement, you may be entitled to Stamp Duty tax relief.

To work out the rate of tax HMRC charge for multiple dwelling:

  • 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

When an employer buys an employee’s house

Some employment contracts include an agreement which dictates that an employer purchases a property for an employee to live in for the duration of their employment.

The employer would then become a landlord and may be entitled to Stamp Duty relief if:

  • The employee agrees to live in the property as their main or only home at some time during the 2 years before their employer bought it
  • The area of land the employer buys is within 0.5 hectares
  • The employee must move as a result of a job relocation and therefore the employer needs to buy the property
  • The price paid by the employer for the property is not more than the market value of the property

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.

When a property developer buys a property

Some property developers agree to purchase a property from a homeowner who is going to buy a new property from them.

In instances like this, the property developer would be exempt from paying Stamp Duty on the purchase of the home.

However, the individual selling the property must:

  • Have lived in the property as their main or only home at some time during the 2 years before the building company or property trader bought it
  • Buy a new home from the house building company
  • Agree to live in the new property as their main or only home (and not rent it out)

Can I claim Stamp Duty as an expense?

A lot of people ask us whether Stamp Duty can be offset against their rental income. Unfortunately, Stamp Duty is seen as a purchasing cost and cannot be claimed back.

For an expense to be tax deductible against your rental income, it must have incurred solely for the purpose of renting the property. Some examples of this include:

  • Repairs and maintenance (as long as they are not made to increase the value of the property)
  • Management fees
  • Utility bills for common areas such as electricity, gas and water
  • Wages (If you need to employ someone to maintain the rental property)

However, that’s not to say that you should completely write off your Stamp Duty fee as a cost you cannot use to gain relief from.

If you sell your property and you make a financial gain (if the property price increases) you can deduct it to reduce your Capital Gains Tax.

Buy to let Stamp Duty tips

  • Speak to a broker who specialises in buy to let mortgages
  • Consider whether getting a Special Purpose Vehicle mortgage could be better. There may be tax benefits that apply to you
  • If being a landlord is your full-time job and your sole income, you may be able to refinance from a sole name to a limited company without paying extra Stamp Duty. You will need evidence of your income to support this

Should I seek advice about buy to let mortgages and Stamp Duty?

Yes. Calculating your expenses as well as any tax relief you may be entitled to can be difficult as there are so many grey areas. It’s important to seek professional advice from someone with experience in buy to let mortgages and Stamp Duty.

Your personal circumstances can affect how much and whether you pay Stamp Duty, so before you purchase a buy to let property, talk to one of the expert brokers we work with about the options that may be available to you.

The advisors we work with can help you to calculate your Stamp Duty tax but they can also save you time and money.

They’ll have access to hundreds of Buy to Let mortgage lenders and can compare the various deals to help you keep your costs down.

Make an enquiry to kickstart your Buy to Let mortgage process and learn more about how Stamp Duty could affect you.

Talk to BTL expert about Stamp Duty

If you have questions about Stamp Duty for buy to let investors and want to speak to an expert for the right advice, call Online Mortgage Advisor today on 0808 189 2301 or make an enquiry here.

Then sit back and let us do all the hard work in finding the broker with the right expertise for your circumstances. We don’t charge a fee and there’s absolutely no obligation or marks on your credit rating.

Updated: 3rd September 2020
OnlineMortgageAdvisor 2020 ©

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The info on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.