What Taxes Do Landlords Pay?
There are three key moments to think about in the property tax lifecycle – when buying a property, every year you let the property, and later when you sell it.
When You Buy Property – Stamp Duty
If you buy a property over a certain price in the UK, you are eligible to pay tax. This tax amount is specific to the value of the property you purchase and depends on the location and circumstances.
Individuals pay Stamp Duty Land Tax (SDLT) on residential properties worth £125,000 or more, and on non-residential properties or land worth £150,000 or more.
When you complete the purchase of your new property, you are required to send a SDLT return to HMRC and pay this within 14 days. Your solicitor, agent or conveyancer can do this on your behalf if you have one, or you can file the return and pay the tax yourself. These rules apply to England and Northern Ireland, there are different rules for Scotland and Wales.
If you are buying for the first time, the thresholds for paying stamp duty are generally higher, so you may not have to pay. If you’re buying to let, stamp duty rates are tiered and start at a lower value than those for other home buyers.
There are temporary arrangements in place for stamp duty, with regards to the current stamp duty holiday but there is expected to be a return to the levels below post-pandemic.
Extension to the stamp duty holiday
The Chancellor announced in the 3 March Budget that the stamp duty holiday in England would be extended until the end of June 2021. Until that time the stamp duty holiday will apply to the first £500,000 of a home’s purchase price.
Between the end of June and the end of September 2021 it will apply to the first £250,000, before returning to the regular cut-off of £125,000 at the beginning of October 2021.
Landlords hoping to expand their property portfolios in the coming months could save thousands of pounds, although property investors will still have to pay the three per cent stamp duty surcharge on second homes and buy to let properties.
Stamp duty rates for regular buyers (not second home or buy to let property buyers) until the end of June 2021 are as follows (the data in these tables comes from HMRC):
In England, the rates for buy to let landlords are:
Property Price Buy to let stamp duty rate
Up to £500,000 3 percent
£500,001 - £925,000 8 percent
£925,001 - £1.5m 13 percent
Over £1.5m 15 percent