Stamp duty for second homes
If you are buying an additional property or are buying a home and may end up owning two properties, you have to pay extra stamp duty. Here’s everything you need to know.
Anyone buying an additional residential property worth more than £40,000 will usually have to pay the additional stamp duty for second homes. This applies whether you’re buying a second home as an investment buy-to-let, for a holiday home or any other purpose.
You have to pay the extra rate even if the property you already own is abroad. It also applies if you only own a share in a property.
How much is stamp duty for second homes?
Rates are different depending on whether you are buying in England & Northern Ireland, Wales or Scotland. If you are a non UK resident, you will also pay a 2% surcharge from 1st April, 2021.
Stamp duty rates in England and Northern Ireland:
|PURCHASE PRICE OF PROPERTY||STAMP DUTY RATE||STAMP DUTY RATE FOR ADDITIONAL PROPERTIES|
|Up to £125,000||0%||3%|
|£125,001 to £250,000||2%||5%|
|£250,001 to £925,000||5%||8%|
|£925,001 to £1.5 million||10%||13%|
|Over £1.5 million||12%||15%|
How much is stamp duty in Scotland?
LBTT rates in Scotland:
|PURCHASE PRICE OF PROPERTY||STAMP DUTY RATE||STAMP DUTY RATE FOR ADDITIONAL PROPERTIES|
|Up to £145,000||0%||4%|
|£145,001 to £250,000||2%||6%|
|£250,001 to £325,000||5%||9%|
|£325,000 to £750,000||10%||14%|
Rates in Wales:
|Purchase price of property||Stamp duty rate||Stamp duty rate for additional properties|
|Up to £180,000||0%||4%|
|£180,001 up to £250,000||3.5%||7.5%|
|£250,001 to £400,000||5%||9%|
|£400,001 to £750,000||7.5%||11.5%|
|£750,001 to £1.5m||10%||14%|
To calculate exactly how much stamp duty you will need to pay, use our stamp duty calculator
Stamp Duty Calculator for England & NI, Scotland and Wales
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What properties are excluded from the stamp duty for second homes?
There are a few cases where you won’t have to pay the additional stamp duty rate:
- Properties worth less than £40,000.
- If you purchase a caravan, mobile home or houseboat regardless of how much you are paying for them.
- Anyone buying a home that replaces the main home in which they live (provided the previous main home is sold at the same time as the new one is purchased).
Do I have to pay if I’m a first-time buyer?
If you don’t own any property but decide to purchase a buy-to-let property then you won’t pay the stamp duty for second homes. That’s because you’ll only own one property.
But, you will pay if you have a part-share in another property, have inherited a property or are buying with someone else who already owns a property.
What if I plan to live in the property I’m buying?
This is where things can get a little complicated.
If the property you are purchasing is going to replace your main residence, then the additional stamp duty rate isn’t payable. But, you have to sell your original main residence at the same time in order to get this exemption. If you haven’t managed to sell your old place but want to buy the house of your dreams, you’ll have to pay the stamp duty for second homes. Sell your original home within 3 years, you can claim the extra stamp duty back.
If you are in doubt you should call HMRC on 0300 200 3510.
What is a main residence?
Unlike with other taxes you don’t have the luxury of selecting which of your properties is your main residence. If you only live at one home, then that is your main residence for stamp duty purposes.
If you spend time at more than one, then HMRC decides which is your main residence. It will consider several factors including:
- If you are married, where does the family spend the most time?
- If you have children, where do they go to school?
- Where are you registered to vote?
- Where are you registered with a doctor/dentist?
What if I own property abroad?
You are liable for the 3% additional stamp duty even if the only other property you own is abroad. So, a holiday home in Tuscany or a timeshare in Florida will mean you pay the stamp duty for second homes rate, even if you are buying your first home in the UK.
If a property is in my spouse’s name can we dodge the additional stamp duty rate?
For stamp duty purposes a married couple, or civil partners, are classed as one unit by HMRC. So, if one owns a buy-to-let property and the other buys a property the second home stamp duty rate still applies. This can make things expensive if you are separating and need to buy another home for one partner.
I’m getting divorced and buying a home do I have to pay the second home rate?
There are special rules in place for this. If Partner A moves out of the marital home and a ‘property adjustment order’ is in place to hand the home over to Partner B, then the additional stamp duty rate does not apply.
If you haven’t organised a ‘property adjustment order’ – your divorce solicitor will help you with this – then you do have to pay the additional stamp duty rate. But, you can claim a refund if you sell your share in the marital home within three years of when you moved out.
You can find out more with our guide to what happens to your home when you separate.
I’ve inherited property do I have to pay the additional rate?
It depends on how much you have inherited. If someone leaves a property in their will and you become the sole owner you have to pay the additional stamp duty if you buy another property.
But, if you have only inherited a share of a property you may be exempt. According to legislation if you inherit 50% or less of a property, and you buy a residential property within three years, you don’t have to pay the extra 3% stamp duty.
I’m buying a property for my children will I have to pay the extra stamp duty?
If your name is going to be on the deeds, and you own another property, then the 3% extra stamp duty applies. But, there are a few ways you can avoid it:
- Gift a deposit – if you aren’t going to be a joint owner then the stamp duty for second homes won’t apply
- Act as a guarantor – Guarantors aren’t classed as owning the property. So, you will avoid the additional rate
- Get a family offset mortgage – This means your put your savings into an account with the mortgage lender. They then act as a deposit, but you retain ownership of the money. Find out more with our guide to helping your child buy a home.
I don’t own any additional properties but the person I’m buying with does. What can we do?
Unfortunately, if anyone buying a property owns another then the stamp duty for second homes rate will be due. Unless they are replacing their main residence.
You could avoid this is if you are not married or in a civil partnership with each other and the person who doesn’t own any other property buys in their name only. But, this could raise other problems including with your mortgage affordability and who benefits from future price rises.
Does the additional rate apply to leasehold extensions?
Yes, it might do. Stamp duty applies to lease extensions just as it does to any other property purchase. But, the £125,000 threshold for standard stamp duty means most people don’t have to pay it.
The issue with the stamp duty for second homes rate is that it kicks in at a much lower £40,000. Pay more for the extension, and own other properties, and you’ll pay the additional stamp duty rate. However, if the lease extension is on your main residence you are exempt.
Other exemptions to the stamp duty surcharge
There are other stamp duty surcharge reliefs including:
- Multiple dwellings relief. For example, investment purchases of multiple properties that are linked as part of one transaction (such as an investor buying a block of flats). Or, when buying a property with an additional granny annexe or other self-contained accommodation.
- If an employer buys an employee’s house.
- Relief for charities and Housing Associations.
If you would like further specialist stamp duty advice on whether you may be able to avoid the stamp duty surcharge, Cornerstone Tax offer no obligation advice and, if you wish to proceed with their service, they can assist you with calculating and submitting your stamp duty return.
How do I claim a stamp duty refund?
If you sell your previous main residence within three years then you can claim a refund.
If you sold your previous main residence on 29 October 2018 or later, HMRC must have your request for a refund within 12 months of the sale of that previous main residence, or within 12 months of the filing date of the return relating to the new residence, whichever is later.
If you think you’ve paid the stamp duty for second homes rate by mistake then you can also apply for a refund.
You will need to provide all your details to HMRC including:
- The address of the property you paid the higher rate on
- The address of the previous main residence that you have sold
- How much stamp duty you paid in total
- How much you wish to claim back
You can file your refund on the HMRC website and, if approved, the money should be back with you within 15 working days.
If you think you may be due a stamp duty refund and would like additional advice, specialist stamp duty refund tax advisors Cornerstone Tax will review your case and have a service to assist with making your stamp duty refund claim. They provide no obligation initial advice.
- Stamp duty calculator
- Buy to let mortgages explained
- Holiday let mortgages explained
- Buying a second home
- How to get a stamp duty refund
- How much is stamp duty and when do I pay?
- Cost of buying a house
- What happens to my home when I get a divorce or separate?
- What to do if you inherit a property?
- Should I sell my home before I buy a new one?
- Should I extend my lease?