If you’re considering purchasing a buy-to-let property and becoming a landlord – whether residential or commercial, purchasing either personally, or through your limited company – it’s a good idea to understand the rate of Stamp Duty Land Tax (SDLT) applied to this type of investment.
Whilst your mortgage broker, or financial advisor can help you understand the rate on your purchase, it is usually the responsibility of the solicitor/ conveyancer involved in the purchase to deal with the reporting and payment of this tax on your behalf.
That said, here at Integro Accounting we have written this guide to help you, if you’re looking to purchase a property to let, to understand the basics of SDLT and how to find the rate you’ll need to pay.
Stamp Duty Land Tax (SDLT) thresholds
When purchasing either land or a property in England or Northern Ireland, SDLT will apply. The amount will depend on the type of property, as well as the amount you pay. The starting thresholds are:
- £250,000 for residential property
- £425,000 for first time buyers of residential property worth £625,000 or less
- £150,000 for all non-residential land and property
There are different land tax regimes for those living in Scotland (Land and Buildings Transaction Tax) and Wales (Land Transaction Tax).
HMRC have listed the criteria on which they’d categorize a non-residential or mixed property here.
Stamp Duty Land Tax (SDLT) Rates on Residential buy-to-let Property
The amount of SDLT you pay will depend on: the purchase price, whether you’re a first-time buyer, and whether it’s your only home. To be clear on the rate applicable to your purchase and situation, we’d suggest using HMRC’s calculator or having a chat with your mortgage or financial advisor.
When purchasing a second residential property (whether it’s as an investment or to be used as a second/holiday home) you will pay a 3% surcharge on top of the normal rate. The table below shows the rates that would apply to an individual purchasing a residential property in the UK:
| Property purchase price | Standard SDLT rate for residential properties | SDLT rate on 2nd / subsequent residential properties |
|---|---|---|
| £0-£250K | 0% | 5% |
| Over £250K & up to £925K | 5% | 8% |
| Over £925K & up to £1.5m | 10% | 13% |
| Over £1.5m | 12% | 15% |
It’s worth noting that if you own multiple properties and sell your main home to purchase a new main home, you will not suffer the 3% surcharge.
SDLT rate on commercial/ non-residential buy-to-let property
SDLT Rates on non-residential or mixed-use property are different to the rates for residential property shown above:
| Property Purchase Price | SDLT rate for standard non-residential properties |
|---|---|
| £0-£150K | 0% |
| Over £150K & up to £250K | 2% |
| Over £250K | 5% |
SDLT Exemptions
There can be occasions where the property purchase is exempt from SDLT, such as for mobile homes, caravans or houseboats, if you’ve paid less than £40k for the property, or for homes costing over £500K which are classed as zero carbon. Read more about HMRC’s SDLT reliefs and exemptions.
Gifts of land and property
Where land or property are gifted to someone, there is generally no SDLT due. However, if the gifted property has a mortgage that is also transferred to the new owner, the value of the mortgage is deemed to be the consideration and so SDLT would be due on this amount.
What is the process for paying Stamp Duty?
From the date of property sale completion, you have 14 days to send a Stamp Duty Land Tax return and appropriate payment to HMRC for residential property and 30 days for non-residential.
In most cases, if you’re using the services of a conveyancer or solicitor when purchasing property, they’d be dealing with this on your behalf, and making the payment from the funds you have made available.
Failure to pay this could see you incur interest or a penalty, so it’s very important to ensure the funds are available for this before the property is purchased.