Stamp Duty Land Tax (SDLT)
SDLT is tax you pay when you buy a property. There is a standard calculation when you buy your main home, which goes up the more expensive it is. The same applies when buying further properties, but includes an additional 3% rise.
You need to pay this supplement whether it's a second home, a new home if planning to rent out your current one (known as 'let to buy'), or a BTL purchase, even if you're living in rented accommodation yourself.
You can't avoid the 3% by saying you own one property and having your spouse buy the second in their name. You and your spouse are considered to be one 'unit'.
| Purchase price | SDLT |
|---|---|
| £250,000 | £10,000 |
| £400,000 | £22,000 |
| £550,000 | £34,000 |
Income tax
You are liable to pay tax on income earned from rental property. This is income tax if it's a personal purchase, or corporation tax if you own it through a limited company. The amount depends on rental income, mortgage interest and other tax-deductible costs.
Tax relief affects your decision on this. Since April 2020, the mortgage interest only attracts tax relieve at the basic rate (currently 20%), even if you are a higher or upper rate tax payer. This means that whilst you may be paying tax at 40% on rental income, any mortgage interest relief is applied at the lower 20% rate.
It's important to get professional tax advice on this before making any decisions about purchasing your BTL.
Accountants
Many landlords use an accountant. It's an additional cost, but they can often help you reduce the tax you need to pay, saving you money in the long run. Ideally you want someone who is a specialist in property tax and has experience advising landlords.
