Do you have to pay stamp duty on second homes?

Buying a second home comes with additional stamp duty considerations. Whether it’s a holiday home, buy-to-let, or investment property, most second home purchases are subject to a higher SDLT rate. This blog outlines key rules, exemptions, and how to manage costs effectively when buying a second property.

What is stamp duty and how does it apply to second homes? 

Stamp Duty Land Tax (SDLT) is a type of tax paid in England and Northern Ireland when buying a property. SDLT is only applicable to properties that cost more than £125,000. However, higher rates of SDLT apply for the purchase of second homes and overseas buyers. Second home SDLT largely depends on the cost of the second property, with tax rates varying from as low as 3% to as high as 15%. 

What is considered a second home? 

In the UK, several legally defining features regulate both the classification and taxation of second homes. A second property is typically defined as a furnished residential property that is not the owner’s primary residence. These homes are commonly used as holiday getaways or rented out. Because they are not main residences, second homes are subject to higher stamp duty rates, and ownership often comes with additional tax obligations and considerations.

How much is stamp duty on a second home? 

Understanding SDLT rates can be complex. Below, we’ve broken down SDLT rates for second homes in Great Britain and Northern Ireland: 

If you want to calculate stamp duty rates as they apply to you, use a stamp duty land tax calculator. 

What affects when you pay stamp duty on a second home? 

Navigating stamp duty on second homes can be complex, with factors like timing, property value, and ownership status affecting what you owe. Professional advice from experts like Rayner Essex can help you manage liabilities and ensure full compliance with changing tax rules. 

Stamp duty exemptions

Whilst SDLT generally applies to second homes in England and Northern Ireland, certain exemptions do exist. Properties valued under £40,000 are exempt, as are mobile homes, caravans, and houseboats- regardless of price. These types are not considered dwellings for SDLT purposes. Despite these exceptions, the vast majority of second home purchases are still subject to SDLT, including the 3% higher rate surcharge.

First-time buyers

For stamp-duty purposes, first-time buyers, by definition, can’t purchase a second home. If as a first-time buyer, you choose to buy your first property as a buy-to-let, standard Stamp Duty Land Tax (SDLT) rates apply. You will not qualify for first-time buyer relief. Should you later buy another property to live in, this would be classed as a second home, making you liable for the 3% SDLT surcharge that applies to additional properties, even if the new purchase becomes your main residence.

Properties abroad

SDLT applies to UK property purchases even when you buy a property abroad, whether it’s a holiday home or timeshare. Owning an overseas property means any UK purchase could be treated as a second home, triggering the 3% SDLT surcharge. As well as the SDLT surcharge, overseas buyers face a further 2% surcharge on top, making the total SDLT liability significantly higher than that of UK-based buyers.

Inherited properties 

Inherited properties can impact the amount of SDLT when buying another home. If you inherit over 50% of a property, any subsequent residential purchase may be treated as a second home, which will be subject to the 3% SDLT surcharge. However, if you inherit less than 50%, you may still qualify for exemption from the surcharge, provided you purchase a new main residence within three years of the inheritance. 

Can you claim back stamp duty on a second home? 

If you buy a new home before selling your previous main residence, you’ll usually pay the higher SDLT rate for second homes. However, you may be eligible for a refund of the 3% surcharge if you sell your former main home within three years of purchasing the new one. It’s important to note that the refund must be claimed within 12 months of selling the old residence or within 12 months of the filing date of the SDLT return, whichever is later. In exceptional cases, HMRC may allow refunds beyond the three-year limit. Exceptional circumstances could be delays caused by government restrictions or other unavoidable events. Exemptions are rarely granted for reasons like divorce, illness, renting out the property, or waiting for the market to improve. In order to make a claim, it’s vital that you keep detailed records and apply promptly if you believe you’re eligible.

Manage stamp duty on second homes with Rayner Essex  

Managing stamp duty on second homes can be complex, but SDLT accountants at Rayner Essex offer expert guidance to help you navigate it confidently. With extensive experience in SDLT, our team provides accurate accounting and tailored advice to ensure you meet all legal obligations while identifying potential savings. Whether you’re buying, selling, or managing multiple properties, we help you understand your liabilities and options. 

Learn more about our SDLT services and how we can support you: contact us today. 

Photo by AXP Photography on Unsplash