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The government is increasing Stamp Duty Land Tax (SDLT) by 3 per cent on buy-to-let and second homes from April 2016.  Higher rates of SDLT will be charged on purchases of additional residential properties above £40,000 – including the previously tax-free element.

Initially, the 3 per cent does not sound like much, but in fact it almost trebles the stamp duty bill on a £275,000 buy-to-let from £3,750 to £10,800. This comes on top of landlords soon losing the ability to offset all their mortgage interest against tax on rental income.

The higher rates will not apply to purchases of caravans, mobile homes or houseboats, or to corporates or funds making significant investments in residential property given the role of this investment in supporting the government’s housing agenda. The government will consult on the policy detail, including on whether an exemption for corporates and funds owning more than 15 residential properties is appropriate.

 Property value  Standard rate  Buy-to-let/second home rate (April 2016)
 Up to £125,00  0%  3% (from £40,000 to 125,000)
 £125 – £250,000  2%  5%
 £250 – £925,000  5%  8%
 £925 – £1.5m  10%  13%
 over £1.5m  12%  15%

Source: HMRC

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