The changes to buy-to-let stamp duty and how these may affect you

Landlord Insurance

A stamp duty surcharge was announced by the government in the 2015 Autumn Statement in an attempt to slow down the relentless rise in house prices. Many commentators blame buy-to-let landlords for pushing up property values and squeezing first-time buyers out of the market.

Stamp duty increases came into force in April 2016, and will apply to property purchases in England, Wales and Northern Ireland.

Landlords are currently paying the standard rates of duty, plus an extra 3% on each band, when they purchase a buy-to-let property.

The surcharge could add thousands of pounds to the stamp-duty bill.

Under the previous regime, there were no stamp duties to pay on properties of up to £125,000.

Currently buyers who live in the property pay:

Property Value Stamp Duty Rate for second property/buy-to-let
Up to £125,000                                      3%
The next £125,000 (the portion from £125,001 to £250,000)                                      5%
The next £675,000 (the portion from £250,001 to £925,000)                                      8%
The next £575,000 (the portion from £925,001 to £1.5 million)                                      13%
The remaining amount (the portion above £1.5 million)                                      15%


Some properties which are currently exempt from stamp duty, those worth between £40,000 and £125,000, will now be subject to it. Properties worth less than £40,000 are still exempt.

Don’t forget that each proportion of a property’s value is taxed at the relevant rate – so for a property worth £925,000, the first £125,000 will be taxed at 3%, the portion from £125,001 to £250,000 will be taxed at 5% and the portion from £250,001 and £925,000 will be taxed at 8%.

Currently the rates for landlords (or anyone buying a second house) will be 3% on the portion of the property up to £125,001 and £250,000.

Landlords will pay five times more than an ordinary buyer.

Surcharge Liability 

The surcharge applies to anyone who is buying an additional property.

You will have to pay a higher stamp duty if the property you are buying replaces your main residence, but the main residence has not yet been sold. In accordance to this situation, you can apply for a refund provided the previous main residence is sold within 36 months.

The law will not just affect landlords. If a couple owns a property in one partner’s name and buys an additional property in England, they would have to pay the higher rate of stamp duty.

If a parent is looking into buying a property for a child, unless the property is bought solely in the name of the offspring, he or she will pay the higher stamp duty rate.

The surcharge also extends to homes abroad. For example, people who already own a home in Spain and buy an additional property in England will have to pay the higher rate of stamp duty.


Corporate Responsibilities

Setting up a limited company probably sounds appealing for landlords, but the change will apply to companies as well as individuals.

The treasury is considering charging the higher rates of stamp duty to companies on their first purchase of a residential property. To avoid pushing out bigger property firms it is expected to exempt companies with more than 15 properties in their portfolio.

Charities and registered social landlords will continue to be excluded from the stamp duty changes.


Exempt Properties

Some properties are also exempt from the surcharge.

Caravans, mobile homes and house boats are not currently liable for stamp duty and there are no plans in place to change that.

Properties worth less than £40,000 are excluded and so will be residential properties worth less than £40,000 once determined if an additional property is being bought.


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6th May 2016