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How does the stamp duty holiday affect buy-to-lets?

Landlord Stamp Duty: How does the stamp duty holiday affect buy-to-lets?

On 8th July 2020, chancellor Rishi Sunak announced changes to Stamp Duty in England. Until 31st March 2021, 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 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 are 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.

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).

Now though, 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.

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

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