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:

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?

For the sixth time this year, interest rates will be increasing next month from 11th October 2022.

Starting at 2.6% at the beginning of 2022, the most recent increase was 4.25% just last month, following the Bank of England’s decision to raise their base rate from 1.25% to 1.75%
in August.

Now, in September, the Bank of England Monetary Policy Committee has voted to increase the base rate yet again to 2.25%. Since HMRC interest rates are linked to the Bank of England’s base rate, this means that HMRC interest payments – which went up last month – are also going up in October.

What is happening to HMRC interest rates?

HMRC charges interest on late tax payments or repayments in line with the Bank of England (BoE). Late payment interest is the BoE base rate +2.5%, while repayment interest is the base rate -1%
(with a lower limit of 0.5%).

The BoE uses their base rate to tackle inflation by discouraging over-borrowing, and HMRC uses their linked interest rates to encourage prompt tax payments.

Since the BoE base rate went up to 1.75% in August, HMRC’s interest rates increased to 4.25% for late payments and 0.75% for repayments. Just over a month on, another BoE base rate increase for October will also be pushing these rates up again.

Since the BoE base rate rose to 2.25% on 22nd September, the new HMRC rates will be:

These HMRC interest rates will take effect on 11th October 2022 for non-quarterly instalment payments. However, for quarterly instalment payments, the changes come into effect over a week earlier on 3rd October 2022.

This may be the highest interest rate increase in 14 years, but market predictions believe that it could more than double in the next year to 5.8%.

Who will be affected by the new HMRC interest rates?

Anyone who isn’t up to date with tax payments may struggle with paying the higher interest rates on top of their outstanding taxes, especially with the ever-rising cost of living. The increased HMRC interest rates will apply to the following taxes:

Interest is charged daily from the date that a payment becomes overdue until the date that it’s paid off in full. The longer it takes to pay off, the more interest will accrue.

The due date for PAYE tax payments to HMRC is the 19th of the month for cheque payments and the 22nd of the month for electronic payments – while interest begins to accrue from the 19th, it will be cancelled if you pay electronically by the 22nd.

The only good side of the interest rate news is that people who have overpaid taxes will earn more interest on repayments, meaning they’ll receive more money back from HMRC.

Do you need HMRC tax advice?

With inflation and interest rates soaring to the highest levels in over a decade, it’s more important than ever to make sure that your taxes are filed and paid on time.

Thanks to HMRC’s interest rates system, it’s better to pay early – and perhaps end up overpaying and receiving repayments – than it is to miss deadlines and end up paying more in late payment interest that you won’t get back.

If you think you would benefit from a tax consultancy service to help you manage your finances and tax payments, why not contact GBAC?

Our accountants in Barnsley provide a wide range of services to individuals and businesses across the nation, from payroll to probate, ensuring that every client stays on top of their taxes.