The relationship between landlord and stamp duty is not always an easy one. Most of the time stamp duty is a confusing process with most landlords having to keep up to date with the ever-changing stamp duty land tax changes.
Whether you are a new landlord or have years of experience you might have some questions regarding the process for stamp duty land tax so we have put together a guide to help you to stay informed.
Stamp Duty On Property
Much like council tax, stamp duty land tax is calculated in bands. The higher the price of the property the more stamp duty you will pay. You have to pay stamp duty regardless of your reason for buying a property. Stamp duty is required on all residential properties, including second houses and buy-to-let properties worth over a specified amount.
What’s The Difference Between Residential And Buy-To-Let Stamp Duty?
Stamp duty is due on all property purchases over £40,000 there are distinctions and differences between residential purchases and second homes. It is important to know that properties bought to rent out are classified as second homes under stamp duty land tax regulations.
As of 2016, all second-home buyers were required to pay an additional 3% in stamp duty when they bought a property. So, anyone buying a home in addition to their main residence or purchasing a buy-to-let property is obligated to pay the additional 3%.
Overseas Landlords And Stamp Duty Land Tax
Landlords who were planning to buy a UK property from overseas used to pay the same SDLT on buy-to-let homes as residential purchases but as of April 2021 this changed. There is now an additional 2% stamp duty land tax payment on all residential properties for those buying from abroad, including buy-to-let. The 2% is in addition to the 3% if the property is bought for buy-to-let purposes and so international landlords may be looking at a 5% surcharge on stamp duty land tax.
Stamp Duty Land Tax Exemptions for Landlords
There are SDLT exemptions on some properties but these cases are rare occurrences for most landlords.
Charitable trusts and registered social landlords are exempt from the additional 3% stamp duty land tax on buy-to-let properties but still have to pay the regular rate of stamp duty on their property purchase.
If a property is bought for less than £125,000 you will not pay additional surcharges, if the purchase sits between £125,001 and £250,000 you will pay a 2% surcharge. Houses under £40,000 are exempt from stamp duty land tax on second-purchase homes.
Stamp Duty on Main Residence For Landlords
Landlords who are replacing their primary residence aren’t liable to pay the additional 3% stamp duty surcharge on the purchase, despite owning additional properties elsewhere. Proof that the residence is the primary address or main residence will be required to claim back or be made exempt from paying stamp duty on the main residence for landlords. Proof can include or be obtained from an electoral roll document or registration note from your local doctor.
Stamp Duty Refund For Landlords
For landlords, a stamp duty refund can only be claimed if they meet specific eligibility criteria. This usually involves buying a property that isn’t immediately habitable when the sale is completed and doesn’t yet fall under the definition of a ‘dwelling.’ This would require taking a second mortgage out on a property that has officially been declared “uninhabitable.” This would make landlords eligible for a stamp duty refund on any SDLT that they have already paid.
Other conditions of a stamp duty refund for landlords include claiming a refund on the 3% stamp duty surcharge if you meet the following criteria:
- You are selling or giving away your main residence with 3 years of paying the 3% surcharge on stamp duty payments.
- You bought a property with an annexe before 2018 and have paid the higher rate of stamp duty.
- Your buy-to-let purchase was bought under shared ownership or as a first-time buyer on or after 22 November 2017.
- HMRC have made an error causing you to pay an excess in stamp duty land tax.
If you are a landlord seeking a stamp duty refund or want to know if you would be eligible for a stamp duty refund for landlords, get in touch with our CapEx Tax specialists who will be able to walk you through the process and advise you accordingly.