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What tax do I pay on a buy-to-let property?

19th June 2019

First off, what is stamp duty?

Stamp duty has been used in the UK as a form of tax placed on documents, publications, and other amenities since 1684. The tax was often certified by a physical stamp being pressed onto the document in question (hence the name). In most parts of the UK, you’re required to pay stamp duty when you buy property above a certain market value.

Okay, what’s stamp duty land tax?

Stamp duty land tax is a tax on buying property bought in England and Northern Ireland. Introduced quite recently in 2003, its modern function bears no resemblance to the old tax on legal instruments. Rather, SDLT is in fact a ‘transfer tax’ that applies only to transactions of land and property. But that’s enough of the history, now it’s time to understand how it works!

In order to do so, it’s necessary to understand the different rates that are levied for properties of different prices, as well as the discrepancies that exist for first-time buyers and buyers who already own property.

People have to pay stamp duty land tax (SDLT) when purchasing residential property that costs more than £125, 000. You usually pay SDLT on increasing portions of the property price above £125,000 when you buy residential property. These proportions are summarised in the table below which provides a comparison of standard stamp duty rates, buy-to-let and rates for first time buyers.

Tax on buy-to-let property

Since April 2016, anyone buying an additional residential property – that is, one they don’t intend to live in themselves – has had to pay an additional 3 percentage points in stamp duty.

For example, this means there is a:

  • 3pc tax (used to be zero) on second homes worth up to £125, 000
  • 5pc tax (used to be 2) on homes worth up £250, 000
  • 8pc (used to be 5pc) on home worth between £250, 001 and £925, 000
  • 13pc on homes worth up to £1.5m
  • 15pc on homes worth more than £1.5m
Property value (£) Buy-to-let rate (%) Standard rate (%) First-time buyer rate (%)
Up to 40, 000 0 0 0
40, 000 – 125, 000 3 0 0
125, 001 – 250, 000 5 2 0
250, 001 – 925, 000 8 5 ~ 0-5 *
925, 001 – 1.5m 13 10 10
Over 1.5m 15 12 12
*special conditions apply


This also has implications for people helping others, such as their children to purchase property as well as buy-to-let investors. The surcharge also applies to parents helping a child to buy a property. There are various stamp duty calculators available online to help you work out how much stamp duty you’ll need to pay on your new property.

Why did the government make these changes?

The higher rates of SDLT on purchases of additional residential properties has been enforced as part of government plans to support home ownership and first time buyers.

Who is affected by the higher SDLT on buy-to-let mortgages?

This doesn’t have implications for first-time buyers looking to use their first owned property for buy-to-let (that is, not for themselves to live in). The exception to the extra stamp duty is people who’ve never owned a property before whether they are investing in property as first-time buyers for buy-to-let or as their first home.

Read this no-nonsense and jargon-free guide to stamp duty  James Anderson’s blog to get to grips with stamp duty.

For buy-to-let mortgage advice, get in touch with the IMC team for advice and information that is catered to you.


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