In 2021, more than £8.5 billion worth of buy-to-let properties were purchased by individual landlords and investment companies. Evidently, buy-to-let properties are a popular way to invest money and get established in the UK property market. 

However, while buy-to-let properties are a great means of investment they are often sold and many people are left confused about claiming back stamp duty for buy-to-lets. Generally, buy-to-let stamp duty will vary between buyers, depending on personal circumstances. There are multiple factors which will affect the stamp duty on buy-to-let properties which you might want to consider before deciding if it is worth it.

Read this complete guide to find out what buy-to-let stamp duty is, how it works and how you could claim back buy-to-let stamp duty in the UK today. 

 

What Is Stamp Duty and How Does It Work for Buy-to-Lets?

First – what exactly is buy-to-let stamp duty and how does it work? In short, stamp duty land tax (SDLT) is a property tax paid to HMRC for any properties purchased in England or Northern Ireland (Scotland and Wales have their own tax schemes). 

This tax is paid by anyone who buys a house, flat, and other land or building over a certain price. When stamp duty is in question for buy-to-lets, a higher stamp duty is required to be paid because most buy-to-let purchasers already own second homes. Find out more below. 

 

Is Stamp Duty Tax Higher on Buy-to-Let Properties?

Since 2015, there has been a government initiative stating that a 3% additional stamp duty rate would be introduced for anyone buying a second home. This was in an effort to provide more affordable homes, preventing those purchasing a buy-to-let home from taking properties away from first-time buyers or families who were struggling to afford a property. 

 

How Much Is Stamp Duty on Buy-to-Let Properties?

For residential buy-to-let properties, the standard rate of stamp duty varies based on the property price. However, even within the different property prices, there is a great deal of variation to how much stamp duty is paid. Each of the following can impact the amount you will pay for stamp duty on a buy-to-let property:

  • If you own another property – if you currently own one or more other properties, you will pay more for your stamp duty on a buy-to-let property. This affects most buy-to-let purchases as these buyers already own their own homes. The surcharge for stamp duty is 3% up to £250,000 of the property’s value or up to 15% above £1.5 million. 
  • You’re not a UK resident – if you are not a UK resident, you will need to pay a further 2% surcharge for stamp duty land tax. This will apply to anyone who has spent more than 182 days out of the UK in the 12 months leading up to the property purchase. For non-UK residents who already own at least one property they will be subject to the following rates: 5% on the first £250,000 of the property value, 10% for properties between £250,001 and £950,000, 15% on properties between £950,001 and £1.5 million and 17% on any value above £1.5 million.
  • You are a first-time buyer – first-time buyers are not the typical buyers for buy-to-let properties; however, there are always exceptions. If this is the case, these buyers will be entitled to the same stamp duty tax relief as any other first-time buyer. As long as they comply with the other criteria (i.e. they are a UK resident and the property is worth less than £625,000), they will pay 0% on the first £425,000 and only 5% on properties between £425,001 and £625,000.

 

Can You Add Stamp Duty to a Buy-to-Let Mortgage?

Adding stamp duty to a buy-to-let mortgage is rarely possible. These mortgages typically require a larger-than-average deposit of 20-25% of the property value. This means that you already need to have a large amount of cash saved up for the deposit. Adding stamp duty to this could mean borrowing nearly 85% of the property values – an arrangement that the majority of lenders will reject.

 

What Stamp Duty Exemptions Are There for Buy-to-Let Properties?

There are currently no stamp duty exemptions specifically for buy-to-let; however, some general exemptions and reliefs could be relevant for buy-to-let properties, such as: 

  • First-time buyer relief
  • Relief for charities 
  • Multiple dwelling relief (MDR)
  • Relief from the non-UK resident surcharge for Crown servants and their spouse or civil partner

 

Can I Claim Back Stamp Duty on a Buy-to-Let Property?

Yes, just like other properties such as unmortgageable properties, second homes or uninhabitable properties and more – buy-to-let properties may also result in buyers overpaying stamp duty initially. In certain cases, buy-to-let property owners may be entitled to claim back the surcharge they originally paid. Such as, if they sell their other properties and now only own the buy-to-let property.

If you believe you may be entitled to a stamp duty rebate for a buy-to-let property, get in touch with us today. The rules surrounding buy-to-let properties can often be confusing, so, let the experts help. We can find out whether or not you may be eligible to reclaim stamp duty originally paid to HMRC.