Stamp Duty Holiday - What Does It Mean for Buy to Let Investors?

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Stamp duty is a tax that is paid by those purchasing property in the UK. Stamp duty tax varies slightly by location. In England and Northern Ireland, this tax is named stamp duty land tax, while in Scotland it’s land and buildings transaction tax and in Wales, it’s land transaction tax.

The amount that each individual buyer has to pay depends on their circumstances and the overall cost of the property. Normally, those purchasing a buy to let property would need to pay 3% tax on anything under £125,000, 5% tax on a property worth £125,000 to £250,000, and 8% on a value of £250,000 to £925,000. The percentages change for buy to live purchases. For buy to live purchases (provided the buyer sells their previous home), a property worth less than £125,000 requires zero tax, while a value of £125,000 to £250,000 would call for a tax of 2%, and 5% tax for a value of between £250,000 to £925,000. Meanwhile, first-time buyers of a buy to live property are exempt from stamp duty tax on properties worth less than £300,000.

With these new UK stamp duty rules, those buying a residential property only need to pay stamp duty on properties with a value of over £500,000, while buy to let investors will pay 3% tax on a property up to the same value. On property purchases made between June and September 2021, residential purchases only require stamp duty tax on properties worth £250,000 or less, while a 3% tax will be implemented on buy to let purchases of the same price.

The stamp duty holiday will now last until the end of June 2021 for the higher threshold and the end of September for the lower threshold. This leaves plenty of time for buyers to take advantage of the tax savings available. However, as we’ve seen since the stamp duty tax break was first announced, the new rules have caused a boom in property market activity. This means you may want to act sooner rather than later if you don’t want to lose out to another buyer on a particular property.

What Does This Mean For First-Time Buyers?

First-time buyers normally don’t need to pay stamp duty tax if their property is worth less than £300,000. Like other buy-to-live buyers, first-time buyers won’t need to pay any stamp duty tax on a property worth less than £500,000. This gives first-time buyers more leeway than usual in the type of property they can buy before paying tax.

To see the latest information for first-time buyer stamp duty, be sure to check out our brand-new guide for 2024.

What About First Time Investors?

If you don’t already own your own home and are looking to purchase a buy-to-let property, you won’t need to pay any stamp duty tax on properties worth £500,000 or less from now until June 2021. This is a great option for investors who currently rent or live with family and are looking to make a buy-to-let investment as their first property purchase.

Unfortunately, those who have already completed on their purchase prior to 8th July will not be eligible for the new stamp duty holiday rules.

Is Stamp Duty Payable by Overseas Buyers?

Overseas buyers are still required to pay the same stamp duty costs as those living in the UK. This means that if you’re buying a property in the UK from overseas, you’re still able to save on stamp duty tax on purchases before the stamp duty holiday ends.

However, keep in mind that overseas residents buying residential property in England and Northern Ireland will be required to pay a 2% surcharge on top of stamp duty costs from April 2021.

What Does This Mean for Homeowners Looking to Sell?

Stamp duty doesn’t affect homeowners selling their property, as it only applies to those buying a new property.