Stamp Duty – Death of the Buy-to-Let?

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What Does Mortgage Protection Cover?
29 Oct 2015
Downsizing to a smaller property?
28 Dec 2015

Stamp Duty – Death of the Buy-to-Let?

Stamp Duty Changes – Is This The Death Of Buy-To-Let

Is this the death of buy-to-let? Stamp duty bill on a £275k home is more than trebled as Chancellor targets landlords

  • Stamp duty surcharge of 3% added to buy-to-let and second homes
  • Bill for a £275,000 property to rocket from £3,750 to £12,000
  • Described as ‘catastrophic for the private rented sector’ by lettings expert
  • Warning of rush of buy-to-let and second home purchases before April

Chancellor George Osborne handed landlords another shock in the Autumn Statement by announcing an additional 3 per cent stamp duty surcharge on buy to let and second home purchases from 1 April 2016.

The addition of a 3 per cent extra charge for these properties in all stamp duty bands above a £40,000 starting level will more than treble the bill for buying a £275,000 home – increasing it from £3,750 to £12,000.

The reason given was: ‘Frankly, people buying a home to let should not be squeezing out families who can’t afford a home to buy. So I am introducing new rates of stamp duty that will be three per cent higher on the purchase of additional properties like buy-to-lets and second homes.’

Property experts are concerned that the move could distort the housing market and cause a rush people buying buy-to-let and second homes before the beginning of April next year.

David Cox, the head of the Association of Residential Letting Agents described it as ‘catastrophic news for the private rental sector’.

The new surcharge for landlords will be introduced from April 2016 and according to George Osbourne, those buying second homes will raise £1billion for the Treasury by 2021. They plan to reinvest some of that money in local communities in London and Cornwall which are being priced out of home ownership.

How the stamp duty charge on buy-to-let and second homes will hit

Additional residential properties, such as buy-to-let properties and second homes, will all incur the higher rates of stamp duty. The higher rates will be 3 percent above the current SDLT rates. The Chancellor hopes this will help towards doubling the affordable housing budget – and will also assist first time buyers.

Purchases of additional residential properties above £40,000 will be charged the higher stamp duty charges. It will see 3 percent added to every band – including the previously tax-free element which was anything below £125,000.

It comes as the buy-to-let boom has been examined closely by the Bank of England over the past year.

Purchases of caravans, mobile homes or houseboats will not be subject to the increased rates. They also won’t apply to corporates or funds making significant investments in residential property given the role of this investment in supporting the government’s housing agenda.

The property and buy-to-let industry have reacted with shock to the news. Mortgage experts are worried that these new changes could mean higher rent as landlords seek to recover the additional tax. They feel this will only way to solve the housing crisis is the supply of more homes to buy and more to rent and increasing stamp duty will distort the buy-to-let market and restrict supply.

House price Stamp duty today Stamp duty April 2016 Difference
£150,000 £500 £5,000 £4,500
£200,000 £1,500 £7,500 £6,000
£250,000 £2,500 £10,000 £7,500
£300,000 £5,000 £14,000 £9,000
£500,000 £15,000 £30,000 £15,000


Last December, the Chancellor announced big changes to stamp duty bands. It saw stamp duty on a £275,000 property falling from £8,250 to £3,750.

The new changes will still add thousands of pounds to the ‘old style’ stamp duty system, which we saw pre-December 2014.

The latest blow for investors comes after George Osborne revealed a crackdown on mortgage interest tax relief in his summer Budget.

The amount landlords can claim as relief will be set at the basic rate of tax – currently 20 per cent.

This change will be phased in over a four-year period from April 2017. At present, landlords can claim tax relief on monthly interest repayments at the top level of tax they pay of 45 per cent.

Mortgage interest relief is estimated to cost £6.3billion a year, a Freedom for Information request revealed.


At present, buyers don’t pay any stamp duty on the first £125,000. They then pay 2 per cent on £125,000 to £250,000 and then a further 5 per cent on anything above £250,000, up to £500,000. Above this rates continue to step up.

For those buying a buy-to-let property or second home, as of April 2016 stamp duty will be 3 per cent on homes between £40,000 and £125,000, 5 per cent to £250,000 and 8 per cent to £500,000.

So, for those purchasing a home for £275,000, the current rate of stamp duty means a £3,750 stamp duty bill.

This is worked out by:

0% on the first £125,000       £0

2% on the next £125,000      £2,500

5% on the final £25,000        £1,250

Total SDLT                             £3,750

But adding the 3 per cent surcharge will see the price of the tax rocket for landlords.

3% on the first £125,000       £3,750

5% on the next £125,000      £6,250

8% on the final £25,000        £2,000

Total SDLT                             £12,000

Post courtesy of This is Money.

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