How Stamp Duty Discounts Work For Landlords
Landlords across the country have gained a financial boost from cuts to tax on buying a home – unless the property is in Wales.
How much they save depends on where they buy property, as the tax rates and thresholds differ for England, Scotland, and Wales.
Chancellor Rishi Sunak led the way by cutting stamp duty in England as part of his Summer Statement 2020 announcements to kick-start the economy. Reductions quickly followed him in Scotland, and ministers in Wales have carefully weighed how to give local buyers a discount while excluding landlords and second homeowners.
To help quell the confusion, this guide explains how the stamp duty discount works for landlords in each country.
How To Work Out What To Pay
The excellent news is landlords and property investors all gain from reduced stamp duty when buying homes – but confusingly, the rates and values differ because England, Wales and Scotland make their own rules about applying the tax.
A crucial point to remember is that stamp duty depends on the property location, not where the buyer lives. That means a landlord in Manchester buying property in Cardiff pays the Welsh rate of Land Transaction Tax, not the English rate.
The discount end date is the same for each country – landlords have until March 31, 2021, to complete their deals at the cheaper rate.
The saving depends on the property price and location, and here’s how to work out how much stamp duty is paid:
England And Northern Ireland – Stamp Duty Land Tax (SDLT)
Chancellor Rishi Sunak hoisted the lower rate threshold from £125,000 to £500,000 for landlords and all other homebuyers.
The higher rate surcharge of 3% applies to landlords and second homeowners. The government reckons the average tax saving is £4,500 for each property sale.
Don’t forget the figures for England also apply to Northern Ireland. The discount runs from July 8, 2020, until March 31, 2021.
| Property price | Stamp duty rate |
| Up to £500,000 | 3% |
| £500,001 to £925,000 | 8% |
| £925,001 to £1.5 million | 13% |
| Over £1.5 million | 15% |
Source: HMRC
Example
If a landlord buys a rental home for £375,000, the LTT is:
| £375,000 @ 3% | £11,250 |
| Total stamp duty: | £11,250 |
Wales – Land Transaction Tax (LTT)
Finance Minister Rebecca Evans has made clear landlords and wealthy second homeowners will see no benefit from a cut in Land Transaction Tax.
The starting rate for paying the tax lifts from £180,000 to £250,000 from July 27, 2020, to March 31, 2021.
Around 80% of home sales are affected, dropping the stamp duty bill by £2,450 for each property.
Landlords and second buyers will still have to pay at the old rates listed in this table:
| Property price | LTT rate |
| Up to £180,000 | 3% |
| £180,001 to £250,000 | 6.5% |
| £250,001 to £400,000 | 8% |
| £400,001 to £750,000 | 10.5% |
| £750,001 to £1.5 million | 13% |
| Over £1.5 million | 15% |
Source: Welsh Government
Example
If a landlord buys a rental home for £375,000, the LTT is:
| £180,000 @ 3% | £5,400 |
| £70,000 @ 6.5% | £4,550 |
| £125,000 @ 8% | £10,000 |
| Total LTT: | £19,950 |
Scotland - Land and Buildings Transaction Tax (LBTT)
Like England, the Scottish government has pulled the lower rate threshold up to £250,000, but landlords and second homeowners must still pay the 4% additional rate. The discount runs from July 15, 2020, to March 31, 2021.
| Property price | Stamp duty rate |
| Up to £250,000 | 4% |
| £250,001 to £325,000 | 9% |
| £325,001 to £750,000 | 14% |
| Over £750,000 | 16% |
Source: HMRC
Example
If a landlord buys a rental home for £375,000, the LBTT is:
| £375,000 @ 4% | £15,000 |
| Total stamp duty: | £15,000 |
Stamp Duty Discount for Landlords FAQ
The rates and thresholds in the tables show how confusing stamp duty can be for landlords and second homeowners. The devil is in the detail with different discount start dates, property values and tax rates for each country.
To help, here are some of the most asked questions about the stamp duty discount for landlords.
Why are each country’s stamp duty rates and thresholds different?
The reasons vary, but ministers in Wales and Scotland feel their property tax figures reflect their lower average house prices.
The government in Wales also seems determined to make sure English landlords and second homeowners do not gain from the discount.
Why doesn’t the UK have one stamp duty rate?
Westminster has devolved setting stamp duty rates and thresholds to ministers in Wales and Scotland. Northern Ireland is still under the English regime while Stormont is not sitting.
How do I split the property price between thresholds?
Start with the purchase price, deduct the first threshold and multiply by the rate to arrive at the tax due for that threshold.
Take the remaining purchase price and go to the next threshold, deduct that amount and multiply by the rate.
Add that to the first threshold tax. Do this until you have worked out the tax for each threshold, and then add them all together to reveal the final liability.
Do the rates apply to people buying their own homes?
No. The rates quoted above only apply to buyers who already own a home – the rates for first-time buyers and movers are lower.
What happens to out-of-time purchases?
If a landlord agrees to buy a home before March 31, 2021 but does not complete the purchase until April, the stamp duty discount does not apply.
The critical date is the completion date, not the date a sale was agreed upon. If the deal was agreed upon before the discount periods, the stamp duty reduction only applies if the sale is completed within the discount term.
Find Out More
HMRC – Temporary reduced stamp duty rates: England and Northern Ireland Welsh Government – LTT rates and bands
Subscribers get full access to exclusive content, including forms, articles and discounts, plus our time saving Tenancy Builder tool.
Signup for our free weekly digest and get the latest news and guidance straight to your inbox (some content requires a paid subscription).