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SDLT, LBTT and LTT hit of buying an investment property



Where a property is purchased in England or Northern Ireland and the consideration exceeds the relevant threshold, stamp duty land tax will be payable. However, where the property is an additional residential property, a supplement applies. For properties in Scotland, the charge is to Land and Buildings Transaction Tax (LBTT) and in Wales, the charge is to Land Transaction Tax(LTT). As in England and Northern Ireland, a supplement applies to second and subsequent residential properties. As the supplements and charges vary, the location of the property will affect the tax that is payable.


England and Northern Ireland

Stamp Duty Land Tax on second and subsequent residential properties attracts a 3% supplement in addition to the usual residential rate. Although the residential SDLT threshold is set at £250,000, the supplement bites if the consideration is more than £40,000. The rates charged on second and subsequent residential purchases are shown in the following table.

Consideration

Rate (including 3% supplement)

Up to £250,000

3%

The next £675,000 (£250,001 to £925,000)

8%

​The next £575,000 (£925,001 to £1.5 million)

13%

​The remaining portion above £1.5 million

15%

The supplement does not apply if the property is the only residential property that the purchaser owns anywhere in the world.


Example

Tony owns a main residence and a property portfolio of three residential properties. He purchases a further residential investment property for £500,000. He pays SDLT of £27,500 on the purchase ((£250,000 @ 3%) + (£250,000 @ 8%)). This is an effective rate of 5.5%.


SDLT on commercial properties and mixed-use properties is payable at the non-residential rates. There is no SDLT to pay where the consideration is less than £150,000. Thereafter, SDLT is charged at 2% on the next £100,000 and at 5% on the remainder. There is no supplement.

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