Landlord Stamp Duty in 2023: Stamp Duty Land Tax for UK Buy-to-Lets

landlord stamp duty

In July 2020, chancellor Rishi Sunak introduced a Stamp Duty holiday across England. On 3rd March 2021, this holiday was extended until 30th June. During this time, first-time buyers and those replacing their residential properties will pay no Stamp Duty below £500,000. But how do these changes affect landlords and buy-to-let properties?

What is landlord stamp duty?

Stamp Duty is a tax paid on property transactions. In England and Northern Ireland, you must pay Stamp Duty Land Tax if you buy a property over a certain price.

In Scotland, Land and Building Transaction Tax replaced Stamp Duty in 2015. Likewise, in Wales, Stamp Duty was replaced by Land Transaction Tax (LTT) in 2018. If you already own more than one property, higher rates of LTT may apply.

Stamp Duty Land Tax is paid in England if you:

  • Buy a freehold property
  • Buy a new or existing leasehold properties
  • Buy a property in a shared-ownership scheme
  • Are transferred land or property in exchange for payment, for example you take on a mortgage or a buy a share in a house

Before the chancellor’s initial announcement on 8th July 2020, Stamp Duty applied to property purchases above £125,000.

How much you pay depends on whether you’re a first-time buyer and if the property or land is residential or non-residential (such as a commercial office or agricultural land).

What were the 2020 changes to stamp duty?

On July 8th 2020, the chancellor increased the Stamp Duty threshold to £500,000 for residential properties.

This means that first-time buyers and those replacing their main residence won’t have to pay Stamp Duty tax on property purchases below £500,000. These changes are effective until 31st March 2021.

What are the 2021 changes to stamp duty rates?

The stamp duty holiday was originally going to end on 31st March 2021, however, this deadline was extended by the chancellor in his Spring Budget announcement.

Instead, the holiday will now run for three more months and end on 30th June 2021.

From 1st July, the nil-threshold will be brought down from £500,000 to £250,000 until the end of September. Normal stamp duty rates will resume on 1st October 2021.

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How do the Stamp Duty changes affect landlords and buy-to-lets?

Although the Stamp Duty changes will affect first-time buyers the most, landlords and property investors can still benefit.

Before July 8th 2020, buy-to-let Stamp Duty rates were as follows:

  • 3% up to £125,000
  • 5% between £125,001 and £250,000
  • 8% between £250,001 and £925,000
  • 13% between £925,001 and £1.5 million
  • 15% above £1.5 million

So, if you purchased a £500,000 buy-to-let property before the Stamp Duty changes took place, you would have paid £30,000 (3% of £125,000, 5% of the next £125,000 and 8% of the remaining £250,000).

Until 1st July 2021, landlords and property investors are only required to pay a 3% flat-out fee up to the raised threshold of £500,000. So, instead of paying £30,000 in Stamp Duty on a £500,000 property – you would only pay £15,000.

After 1st July and until 30th September, this threshold will be lowered to £250,000. Landlords can still benefit from this ‘interim’ period. For example, if you purchase a buy-to-let at £250,000 between these dates you would pay a 3% stamp duty fee of £7,500.

However, if you purchased this same property on 1st October (when stamp duty rates go back to normal) your stamp duty charges would be £10,000 (3% of the first £125,000 then 5% of the remaining £125,000).

Buy-to-let property purchases above £500,000 will be subject to additional Stamp Duty rates. Here’s a quick break down of the brackets:

  • 3% up to £500,000
  • 8% between £500,001 and £925,000
  • 13% between £925,001 and £1.5 million
  • 15% above £1.5 million

Find out how much Stamp Duty you would pay (and how much you would save compared to normal rates) with our Buy-to-Let Stamp Duty Calculator.

Buy-to-let Stamp Duty Calculator

What about landlords replacing their main residential property?

If you want to sell the residential property you live in and purchase another – you can also save on Stamp Duty.

Whether you own one buy-to-let property or one hundred, if you are replacing your main residential property before June 30th 2021 you can pay zero Stamp Duty tax up to £500,000.

Things get a little tricky here. If you have already sold the property you live in and are ready to buy your replacement residence – you will pay zero Stamp Duty tax up to £500,000 on this purchase.

However, if you are struggling to sell your house and haven’t completed the sale by the time you buy your new residential property – you will have to pay the 3% Stamp Duty tax on this purchase. The good news is that if you find yourself in this position – you can claim a Stamp Duty refund on your purchase if you sell your previous residential property within three years.

How are landlords feeling about the changes to Stamp Duty?

We asked 90 landlords how they felt about the initial changes to Stamp Duty.

Only 13% of landlords reported that the changes had encouraged them to buy more property – with the majority (75%) not feeling affected by it at all.

When asked to provide a comment on the matter, many landlords were completely unphased by the Stamp Duty changes – with some unsure on the impact it will have on those with multiple properties.

One landlord felt that “it hasn’t been made clear what Stamp Duty landlords still have to pay”, whilst another considered the changes to be “great for residential purchases but it doesn’t make any difference for buy to let”.

The primary focus on first-time buyers may have caused a lack of clarity regarding buy-to-lets, however, a few landlords are feeling certain about the positives.

One respondent felt the changes would “help to add to their portfolio in the future”, and another said that buying further property was now a “tempting thought”.

Do the temporary changes to land tax in Scotland and Wales apply to buy-to-lets?

In Scotland, the threshold for Land and Buildings Transaction Tax (LBTT) has been raised from £145,000 to £250,000.

Anyone in Scotland purchasing a buy-to-let or second home will still have to pay the additional 4% surcharge on properties above £40,000 – but will benefit slightly from the raised threshold. These changes came into force on 15 July 2020 and will effective until 31 March 2021.

In Wales, the Land Transaction Tax threshold has been raised from £180,000 to £250,000 for those buying their first home. Landlords and second-home buyers will be unaffected by this change and will continue to pay the same rates as before.

Calculate your landlord stamp duty

Got a buy-to-let property in mind? Use our Landlord Stamp Duty Calculator to find out how much Stamp Duty you would pay.

Buy-to-let Stamp Duty Calculator

How have the changes to Stamp Duty affected the property market?

On the day of the initial chancellor’s announcement, 8.5 million people visited Rightmove – making it their busiest day ever. Likewise, requests from potential sellers hit a record high – increasing by 89% on the same day in 2019.

Advertise your rental property on Rightmove and Zoopla today.

RICS UK reported that 75% of surveyors saw a rise in buyer enquiries since the announcement – with Countrywide recording a 38% increase in interest from first-time buyers.

In 2020, over £171 billion worth of residential property was sold in England and Wales. This was 38% lower than 2019 figures. The market recieved a significant boost from the reopening of the property sector and the stamp duty holiday, but the pandemic has clearly taken its toll.

What are your thoughts on the changes to stamp duty? Let us know in the comments below.

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