Buy-to-let: Stamp duty reminder


In case you haven’t noticed, there’s a real stampede on right now. Not to finish the Christmas shopping, but to try and take advantage of the stamp duty land tax holiday in England before next spring.

Back in July, the stamp duty land tax-free threshold on buying residential property temporarily increased from £125,000 to £500,000, benching the 2% tax rate in the process.

Given how 2020 has gone, all bets are off when it comes to predicting whether or not an extension to this is in the pipeline, but for now this tax break is due to end on 31 March 2021.

While the Government was keen to promote how the holiday will take “nine in ten buyers out of paying stamp duty”, it didn’t give the same fanfare to buy-to-let landlords who also stand to benefit.

In fact, residential landlords made 15% of agreed property purchases in November 2020 – the highest rate since December 2016, according to estate agent Hamptons .

Tax implications for landlords

Exactly like before July, buy-to-let landlords are still required to pay a 3% stamp duty surcharge on second homes in England worth more than £40,000.

Despite this surcharge remaining in place during the initial nine-month stamp duty holiday, private landlords have still been able to reduce their overall stamp duty bills when it comes to snapping up new properties.

For example, let’s say you’re a cash buyer and stump up £330,000 for a three-bed house in Bromley on 1 January 2021.

The first £40,000 is tax-free and the remaining £290,000 – as £330,000 is well within the £500,000 nil-rate band – is liable to the 3% surcharge. Your stamp duty bill would be £9,900 .

If you were to complete on 1 April 2021, which is when the previous regime is due to kick back in, the first £40,000 is still tax-free but the nil-rate band is £125,000. You can expect to pay:

  • 3% on the slice that’s over £40,000 up to £125,000 (£3,750)
  • 5% on the portion from £125,000 to £250,000 (£6,250)
  • 8% on the price from £250,000-£330,000 (£6,440).

Your stamp duty bill would be £16,400 – £6,500 higher than if you complete before the end of March next year.

Cash is king

Going back to that study from Hamptons, 51% of all residential property purchases in England by buy-to-let landlords last month were made by cash buyers.

That indicates that private landlords with larger residential property portfolios are expanding their investments, perhaps snapping up homes from smaller landlords who are feeling the effects of recent tax changes.

Obviously, being a cash buyer smooths the purchasing process as no time is wasted trying to find the best mortgage deal to secure from a lender.

As long as you can provide evidence of where you got your money under anti-money laundering rules, solicitors can get to work straight away on completing the transfer of ownership.

If you’re looking to expand your buy-to-let portfolio, call me on 07803 782100 or email me at to discuss your tax options.