Stamp duty explained Buy-to-let stamp duty

Stamp duty explained Buy-to-let stamp duty

Use our buy-to-let stamp duty calculator to find out how much stamp duty you'll pay on a buy-to-let property or second home, and find out more about the old and new rates below.

The new buy-to-let stamp duty rules mean that anyone buying an additional property, including buy-to-let landlords and those buying second homes and holiday homes, will have to pay an extra 3% in stamp duty.

Stamp duty for buy-to-let investors and second homeowners

The new second home and buy-to-let stamp duty rates are tiered, just like residential stamp duty rates and income tax. Each tier, or portion of the property price, is now subject to an extra 3% stamp duty on top of the usual rate paid by those buying a home they are intending to live in.

You can check out the old and new stamp duty rates in the table below, and calculate how much you'll now have to pay using our buy-to-let stamp duty calculator, top right.

^a If total property price is £40,000 or less

^b If total property price is over £40,000

Rates also apply to second homes and holiday homes

Take a look at this example to see how it works:

• Property price: £275,000

• Portion 1: £0 - £125,000 - 3% tax (£3,750)  

• Portion 2: £125,000.01 - £250,000 - 5% tax (£6,250)

• Portion 3: £250,000.01 - £275,000 - 8% tax (£2,000)

• Total paid: £287,000 (£12,000 tax)

  Buy-to-let stamp duty: who is exempt?

  If you're married or in a civil partnership and either partner already owns a property, you'll have to pay the additional stamp duty regardless of how many properties you yourself own.

  If the purchase is not made by an individual (eg the buyer is a company rather than a person), the additional stamp duty will apply regardless of how many properties the company owns. 

  So what properties are excluded from buy-to-let stamp duty? 

  If the total price paid for the property is under £40,000 you won't need to pay any stamp duty at all.

  If you're buying a caravan, mobile home or houseboat, you'll also be exempt from stamp duty, regardless of the purchase price and whether it's going to be your main residence. 

  If you exchanged contracts on or before 26 November 2015, and then complete on or after 1 April 2016, you will be exempt from paying the higher rate of stamp duty.

  Moving house

  If you buy a new home before selling your old one, you will have to pay the higher stamp duty rate. However, you can claim this back if you sell your original home within 36 months (three years) of buying the new one. The claim must be made within three months of the sale.

  Holding financial interest in a property

  It's unlikely that additional stamp duty will apply if you have inherited a small share (50% or less) in an additional property, or you hold a financial interest in one as part of a partnership or as a beneficiary of a trust.

  However, there are exceptions, so you should declare any financial interests such as these to your solicitor.  

• For help working out whether you'll have to pay higher stamp duty rates,

  Investing in a buy-to-let property

  Investing in property has been very popular in the last few years. Recently, however, the buy-to-let sector has been coming under intense scrutiny, with the Bank of England monitoring closely for signs of the market overheating.

  Buy-to-let can be profitable, but it's not always straightforward. Not only will you need to become an expert on the local property market and get a suitable mortgage, you'll also need to be prepared for the various responsibilities you'll face.

  If you're buying a property with the intention of letting it out, unless you're buying it outright you'll need a buy-to-let mortgage. The best rates are typically on offer to buyers with deposits of at least 25%, but it is possible to unlock decent deals with a 15% deposit. Mortgage rates and fees tend to be a little higher than on residential mortgages, too. 

  The criteria can also be strict, with lenders looking closely at how much rent you're likely to bring in compared to your mortgage repayments.

  Once you've bought the property, you need to consider the additional costs of letting a home, including landlord insurance, maintenance costs, agent fees and void periods.