Stamp Duty Land Tax for Property Investors

simon

Simon Misiewicz

27th May 2020

Article relevant to the tax year 2020/21

What is Stamp Duty Land Tax?

You may be interested in our main article “buy to let tax for UK landlords”. This article discusses all the different types of tax that you need to be aware of as a UK landlord.

We have written an article that shows what Stamp Duty Land Tax is and how it is calculated. You may wish to calculate and save the SDLT liability. We have created a modestly priced spreadsheet for you to do this. Go ahead and buy the SDLT calculator for just £9.95

Stamp Duty Land Tax (SDLT) is a charge that applies when purchasing land. You can buy a movable building but not pay SDLT. It is the land, not the building that will cost you SDLT.

How much Stamp Duty Land Tax is payable when buying a buy to let property?

Stamp Duty Land Tax is a banded rate. It is a scaled charge. If you buy a property for £300,000 then the following Stamp Duty Land Tax charge will apply

Up to £125,000 Zero
From £125,001 to £250,000 2%
From £250,001 to £925,000 5%
From £925,001 to £1.5m 10%
Over £1.5m 12%

£0 – 0% X £125,000

£2,500 – 2% X £125,000 (£250,000 less the previous SDLT band of £125,000)

£2,500 – 5% X £50,000 (£300,000 less the previous SDLT band of £250,000)

£5,000 is the total SDLT charge that will be applied to a property value of £10,000

We have written another article that provides more details about Stamp Duty Land Tax Rates for residential and non-residential properties.

 

Download your buy to let tax guide here, written by our property accountants

SDLT higher rate –  3% surcharge from November 201

Anyone buying a second residential property will soon have to pay an additional 3% on any residential property with a value of £40,000 or more. Please note that the 3% extra SDLT is in addition to the SDLT rates set in my previous article and is based on the full amount of the property.

The 3% SDLT higher rate also applies to anyone that wishes to buy a residential property within a limited company.

I have written a more detailed article on the 3% SDLT higher rate

Stamp Duty Land Tax Calculator – £9.95

This SDLT calculator will tell you how much is to pay and how to reduce it further.




When does SDLT need to be paid?

SDLT needs to be paid to HMRC within 14 days of the purchase. Most conveyance solicitors will want you to pay this money over to them sooner to prevent the risk of non-payment. The SDLT liability will be documented on the SDLT1 form, which will be prepared by the conveyance solicitor.

Download your buy to let tax guide here, written by our property accountants

What are the ways to reduce SDLT?

There are many ways in which Stamp Duty Land Tax may be mitigated. We have written many articles on this subject but here is a summary:

Identify chattels to reduce Stamp Duty Land Tax

HMRC defines the word ‘chattel’ as a legal term meaning an item of tangible, movable property – something you can both touch and move. Your personal possessions will normally be chattels.

Including:

  • items of household furniture
  • paintings, antiques, items of crockery and china, plates and silverware
  • items of plant and machinery not permanently fixed to a building (Moveable kitchen and bathroom units)

Chattels are not fixed or a part of the land that it sits on. It may be moved from one place to another. As such these items are not subject to Stamp Duty Land Tax.

You can read more about reducing Stamp Duty Land Tax by identifying chattels in our other article.

If you want to know more then please read our “buy to let tax tips for UK landlords” article

Claim Multiple Dwellings Relief (Linked Transactions)

Multiple Dwellings Relief is an opportunity to reduce SDLT when buying a residential buy to let properties. In order for you to claim a discount, you need to purchase two or more properties form the same vendor. This is commonly known as a linked transaction. There is a linked transaction as a there are multiple land transactions taking place with the same buyer/seller.

You can read more details about claiming Multiple Dwellings Relief (MDR) Linked Transactions in our more detailed article

Buy a property limited company, not individual properties

SDLT is charged on land and property. Buying shares in a company attract a different level of tax with Stamp Duty (SD) at 0.5%, which is considerably less than if you purchased several properties from an individual as you would have had to pay the normal scaled level of SDLT, plus the 3% surcharge.

You can read more about mitigating Stamp Duty Land Tax altogether and pay just the 0.5% Stamp Duty by purchasing a property company in our other article.

How can our property accountants help you reduce your buy to let tax?

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