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What stamp duty changes mean for the investment buyer

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1 April 2016 | Money Matters

Changes which come into effect today mean that the way we work out stamp duty on investment buys will change dramatically.

So if you're thinking of buying a property to let, here’s all you need to know about the new system.

The facts

From today, buyers will have to pay more stamp duty when purchasing a property which will not be their main residence.

The amount payable depends on the value of the property - but the main change is that each of the bands used to calculate stamp duty owed has now been increased by 3%.

Exceptions to the higher charges include properties worth less than £40,000, as well as caravans and houseboats.

The numbers

Under the old system, buyers of any homes – whether they were to be main residences or investment buys – paid 0% stamp duty for the first £125,000 of the valuation of the property. Which is simple enough, right?

But let’s try this one for size – the percentages charged for the value above the first £125,000 were previously:

  • 2% for the portion of the property's value between £125,001 and £250,000
  • 5% for the portion valued between £250,001 and £925,000

Still with us? Ok, great! Now let's look at how the system will work from today...

The changes

With the changes, the stamp duty payable for each band of value will rise by 3%.

Remember, this applies to investment buys only – purchases of homes as main residences will remain the same as the old system.

So under the new system, stamp duty on second homes will be charged like this...

  • 3% on the value up to £125,000 (previously 0%)
  • 5% on the value between £125,001 and £250,000 (previously 2%)
  • 8% for the value between £250,001 and £925,000 (previously 5%)

For example – if you bought a second home today for £350,000, you would pay £18,000 in stamp duty fees – £3,750 on the first £125,000 of the value, £6,250 on the next £125,000 and £8,000 on the remaining £100,000.

Before the changes came into effect, you would have paid a total of £7,500 in stamp duty on the same purchase – nothing on the first £125,000 of the value, £2,500 on the next £125,000 and £5,000 on the remaining £100,000.


This rise in stamp duty is for additional properties only – the higher percentages do not apply to property bought to be your main residence.

However, it is worth noting that if a buyer is yet to sell their main residence at the time of purchasing a home, they will have to pay the higher rate and claim back the difference.

Married couples and civil partners will be counted as one unit, so the higher stamp duty rate will apply if one already has a property, though it could be claimed back within 36 months of selling that property. 

More information is available on the government's information page about stamp duty.



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