When purchasing buy-to-let properties, landlords in the UK now face increased surcharges following rate increases over the last few months – particularly property buyers in Scotland.
Rather than paying Stamp Duty Land Tax (SDLT), property buyers in Scotland are faced with Land and Buildings Transaction Tax (LBTT) and those in Wales must pay Land Transaction Tax (LTT).
Read on for a summary of the rate increases and tips on how to reduce Stamp Duty Land Tax.
Increased Land Tax Rates
The following surcharge increases apply from the listed dates onwards:
- SDLT – rising from 3% to 5% from 31st October 2024
- LBTT – rising from 6% to 8% from 5th December 2024
- LTT – rising from 4% to 5% from 11th December 2024
In England, Northern Ireland, and Wales, the top rate is now 17% for properties costing over £1.5 million. In Scotland, the top rate is 20% for properties that cost over £750,000.
As an example, if a buy-to-let property cost £450,000, landlords in England and Northern Ireland would pay £32,500 in SDLT. This will increase from 1st April 2025, when the nil rate threshold is due to drop back to £125,000 after a temporary boost to £250,000 since 2022.
Meanwhile, the LBTT figure in Scotland would be considerably higher for a £450,000 property at £54,350, and a landlord in Wales would pay £36,200 in LTT for a property of the same value.
Ways to Reduce Land Tax
There are a couple of adventurous alternatives that could allow landlords in all four countries to significantly reduce Stamp Duty, such as:
- Purchasing a mixed-use property (e.g. a shop with a flat upstairs)
- Buying a commercial property to convert into a residence
However, converting commercial properties for residential use is a complex area requiring various planning permissions, so expert advice would be needed for this.
In either case, non-residential Stamp Duty rates would apply. So, for a £450,000 property, the cost would be just £12,000 in England and Northern Ireland, £11,000 in Scotland, and £10,250 in Wales.
How to Calculate Stamp Duty
The government website provides online calculators to help you work out the amount payable on a property transaction, which can be found by clicking the links below:
- Stamp Duty Land Tax (SDLT)Calculator
- Land and Buildings Transaction Tax (LBTT) Calculator
- Land Transaction Tax (LTT)Calculator
You can also seek advice from tax consultants like our accountants in Barnsley here at gbac.
If you need professional support from a financial adviser to help ease your tax burden, why not call us on 01226 298 298 or email info@gbac.co.uk and see what we can do for you?