Investing in UK property: stamp duty and Section 24

What a buy-to-let costs above the price, how the stamp duty surcharge works, and why the finance cost rules push landlords towards a limited company.

Updated on 24 August 2026.

What does a buy-to-let purchase cost on top of the price?

Allow 7% to 11% of the price. Stamp duty is the biggest part, because in the UK a second property attracts a 5% surcharge on the whole price (2026). Conveyancing, searches, a survey, the Land Registry fee and a lender arrangement fee follow. On a £212,000 flat that is roughly £17,500.

Stamp duty: the surcharge applies to the whole price

Stamp duty land tax is banded. Each slice of the price sits in its own band, in the way income tax works. The surcharges behave differently: they apply to the entire price, including the slice taxed at 0%.

Source: HMRC, SDLT residential property rates. The nil-rate band of £125,000 has applied since 1 April 2025, the 5% additional-property surcharge since 31 October 2024, and the 2% non-resident surcharge since 1 April 2021. Consulted 3 August 2026.

That structure punishes cheap properties hardest in relative terms. On a £150,000 flat the banded duty is £500, but the surcharge is £7,500. Your effective rate is 5.3%, against 0.3% for an owner-occupier.

Section 24: why your tax bill can exceed your profit

Section 24 removed mortgage interest as a deductible expense for individual UK landlords. Since the 2020-21 tax year you deduct nothing. Instead you get a reduction in your tax bill worth 20% of the interest.

Source: HMRC, "Tax relief for residential landlords: how it's worked out", and Finance (No. 2) Act 2015 section 24. Consulted 3 August 2026.

You are therefore taxed on rent before interest. If you pay tax at the higher rate, the bill can be larger than the cash the property produced. Two landlords with identical properties can land in very different places purely on their own marginal rate.

Work your own bill out in four steps. Take the rent, subtract the allowable costs but not the interest, and apply your marginal rate to what is left. Then subtract 20% of the interest from the tax itself. BRIX Calc supplies the first two figures, the rent and the running costs. The rate and the credit are yours to add.

Personal name or limited company: the number that decides it

A limited company is outside Section 24. It deducts interest as a normal business expense and pays corporation tax: 19% on profits up to £50,000 and 25% above £250,000, with marginal relief between (HMRC, since 1 April 2023).

That does not make a company automatically better. Company mortgages usually carry a higher rate and a larger arrangement fee. Taking the money out costs tax again, as salary or dividend. And moving an existing property into a company is a sale, so stamp duty and capital gains tax apply.

The test is arithmetic, not opinion. Work out the tax on the same property under both structures, then subtract the extra borrowing cost of the company route. No calculator settles it for you, because the answer moves with your other income. The worked example below gives you the first half of that sum.

Leasehold: what the remaining term does to your exit

Leasehold means you own the right to use a property for the remaining term of a lease, paying ground rent and a service charge to the freeholder. Most English flats are leasehold. Below roughly 80 years remaining, extension gets expensive and lenders get cautious.

The Leasehold and Freehold Reform Act 2024 lengthens the standard extension to 990 years and removes marriage value. Large parts of that Act still need secondary legislation and were not fully in force on 3 August 2026. So price today's extension cost into your exit, not the reformed one.

Ask three questions before you bid. How many years remain on the lease? What is the ground rent, and does it double on a review? And what has the service charge done over the past five years? A service charge that has run ahead of inflation will keep doing so, and it lands entirely on your net yield.

Worked example: a £212,000 leasehold flat in Birmingham

A two-bedroom flat bought in 2026 by a UK resident who already owns a home. Financing: 75% of the price, interest only, at 5.4%.

SDLT = 2% × 87,000 + 5% × 212,000 = 12,340

Rent is £1,050 a month, so £12,600 a year. Deduct ground rent £150, service charge £1,250, landlord insurance £180, management £1,260 and a reserve for maintenance and voids of £1,008. Net operating income is £8,752. Interest costs £8,586, so cash before tax is £166.

That £166 is where a calculator stops. The four lines below are the Section 24 sum done by hand on this rent and this interest, at four different tax positions.

The higher-rate landlord ends up £1,618 out of pocket for the year, on a property that produced £166 of cash. That single line is why the limited company question keeps coming up.

England and Northern Ireland only

Stamp duty land tax applies in England and Northern Ireland. Scotland and Wales charge their own transaction tax, with their own bands and their own surcharges.

BRIX Calc models England and Northern Ireland only. For a flat in Edinburgh or Cardiff, use the calculator published by Revenue Scotland or the Welsh Revenue Authority.

Run your own numbers

Enter your price, buyer type, rent and rate in BRIX Calc. It works the duty out across the bands, adds the UK purchase items and the arrangement fee, and shows the operating result before income tax.

It stops there. Section 24, your marginal rate and the cover percentage your lender applies all sit outside it. Put the ICR it shows next to the figure your broker quotes, then work back to the rent you need. Or compare the UK with six other markets in international property investment.

Frequently asked questions

Does the 5% surcharge apply if I am replacing my main home?

No, not if you sell your previous main residence on the same day or before. If the sale completes later you pay the surcharge first and reclaim it, provided the old home sells within three years. The rule looks at properties owned at the end of the day of completion.

Is a limited company always cheaper than owning in my own name?

No. It depends on your marginal rate, your borrowing and what you do with the profit. A basic-rate landlord often gains little, because the 20% credit roughly matches the charge. Company mortgages also price higher. Run both sets of numbers on the same property before deciding.

Is 85 years of lease remaining a problem?

It is close to the point where it becomes one. Below about 80 years the cost of extending rises sharply and lenders grow cautious, so a sale can stall. At 85 years you still have room to act cheaply. Price the extension into your exit before you buy, not after.

Does BRIX Calc work out my UK income tax?

No. It calculates stamp duty across the bands, the UK purchase costs, the arrangement fee and the operating result before tax. Section 24 and the 20% credit depend on your marginal rate and your other income, so they sit outside the tool. Do that part yourself, or have it checked.