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Landlords’ stamp duty surcharge explained

14th December, 2015

We recently wrote about the change to the tax treatment of mortgage interest and now landlords have been dealt another blow with the 3% stamp duty surcharge announced in the Autumn Statement.

Clayton & Brewill’s Doug Perry explains the detail of the 3% surcharge and outlines some options for mitigating its impact.

The new 3% stamp duty surcharge will apply to properties bought as buy to let or second homes and comes into effect on 1 April 2016.

Larger landlords (those with over 15 properties) and corporate entities are currently exempt from the plans so it will be the smaller and ‘accidental’ landlords that will feel the hit.

Stamp duty is applied on a banded basis to properties priced at £125,000 or more. Currently, buyers pay nothing on the first £125,000, 2% on the portion up to £250,000 rising to a maximum of 12% on properties priced at over £1.5 million.

These rates will remain the same for standard residential buyers.

New stamp duty rates for landlords from 1 April

If you are buying a property as a second home (even a temporary one) or to rent out, there will be an extra 3% added to the total price of any property worth more than £40,000.

This 3% of the total price makes for a rather eye-watering stamp duty hit.

For example, a £150,000 property will attract an extra £4,500 in stamp duty, and a house costing £250,000 will have an extra £7,500 of stamp duty payable.

The table below shows how much stamp duty will be payable at each level of property price from 1 April 2016.

stamp duty surcharge for buy to let landlords










So what can you do?

Whilst the Government is set to consult on the detail of the proposal, it is unlikely to change substantively so a ‘cross your fingers and hope it goes away’ approach is not an option.

Negotiate a reduced purchase price

Reports are already suggesting that the surcharge will place a downward pressure on house prices as investors and second homeowners seek to avoid the higher tax bands. The £250,000 band is an important one to stay beneath, with landlords facing £10,000 in stamp duty compared to £2,500 payable by a ‘normal’ house buyer.

Increase the rent

Many landlords will be tempted to attempt to increase rents to help meet the additional costs. It’s unlikely to be popular with tenants but it’s a possible option provided the market will stand the higher rent.

Join forces with another landlord to create a larger group

Currently, landlords with over 15 properties are exempted from the stamp duty surcharge so there may be some merit in joining forces with another buy to let investor in order to build a big enough portfolio. Be aware though that there will be legal costs involved and you may need to consider incorporating in order to formalise such an arrangement. Which brings me on to:

Consider incorporation for your rental properties

Corporate entities are currently exempt from the surcharge. Additionally, incorporation allows landlords to avoid the cuts to tax relief on mortgage interest, as a company will get full relief for any interest costs it incurs.

Caution needs to be taken with switching existing properties in an individual’s name into a corporate entity as the capital gains tax and stamp duty payable could outweigh the benefits of incorporation. Generally speaking, this is an option worth considering for portfolios of six to 10 houses – or those worth in excess of £1 million.

Let Clayton & Brewill crunch the numbers for you

There’s clearly no ‘one size fits all’ solution and, with elements of the changes still up for consultation, we Doug Perry Clayton & Brewillwould encourage our landlord clients to come and talk to us to work out the best route for you and your properties.

Contact Doug Perry on 0115 950 3044 or click here to send an email.


Clayton & Brewill provides audit, tax and advisory services to individuals, owner managed businesses and SMEs across the Midlands, from its network of offices across the region in Nottingham, Long Eaton and Melton Mowbray.


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