Stamp Duty On Second Homes

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Stamp Duty on second homes when purchasing a buy-to-let property for investors

Stamp Duty Second Homes For Landlords & investors (Additional 3%) rates apply to people buying a residential home in the UK.

These additional SDLT rates are in addition to the scaled rates you pay to HMRC on a home purchase.

This charge on residential second home purchases applies regardless of whether a buy-to-let property is purchased with a mortgage or cash.

Feel free to use our free online Stamp Duty online calculator.

What are the basics of Stamp Duty on a Second Home?

Stamp Duty Land Tax (SDLT) is an additional tax you must pay whenever you buy a leasehold, freehold residential property, or a piece of land.

SDLT is only applicable if the residential property or land being bought is worth over a certain amount.

If you buy a residential property that will be your primary residence, you pay additional SDLT at the basic rate.

If you buy an additional property, you pay SDLT at the basic rate, plus a 3% surcharge on each band.

This applies to residential property purchases over £40,000.

If you want to rent the property, you must take out a specialist buy-to-let mortgage.

Once you buy the residential property, there will be additional maintenance costs.

If you later sell a second residential home for more than you pay originally, you could be hit with an additional Capital Gains Tax (CGT) bill on the sale.

How much is SDLT is charged?

Unless the second home is worth less than £40,000 there is no minimum threshold for when additional SDLT must be paid.

SDLT amounts and rates will differ depending on where you buy in the UK.

If you buy a home in England or Northern Ireland, the additional SDLT rates are (including the 3% SDLT higher rate):

Properties up to £250,000 0% but 3% with the SDLT higher rate

Properties between £250,001 and £925,000 8% (5% excluding the 3% surcharge)

Properties between £925,001 and £1.5 million 13% (10% excluding the 3% surcharge)

Properties over £1.5 million 15% (12% excluding the 3% surcharge)

These additional SDLT rates are applicable on any residential property and second homes.

You must pay additional SDLT on a second home regardless of whether you purchased the residential property with a mortgage or cash outright.

We recommend you read HMRC guidelines on SDLT rates on a residential property for further details.

What properties are exempt from Stamp Duty?

There are a few cases where investors won’t have to pay the additional SDLT rates, including:

Buying a home that replaces the main residential home in which they live. This is provided that the previous principal residence is sold simultaneously as the new one is purchased.

If you sell your original residential home within three years, you can claim the additional SDLT.

The higher additional SDLT rates only apply to additional residential property.

The following types of property and land are exempt and would not be considered when determining ownership of additional property for SDLT purposes:

– Commercial property (including offices and shops)

– Agricultural land

– Plots of land

– Forests

– Any land or property that is not used as a residence

Stamp Duty (SDLT) on second homes for investors that want to rent out a property.

What is the additional stamp duty rate for buying a second home in the UK?

In the UK, purchasing a second home is subject to an additional 3% stamp duty land tax (SDLT) on top of the standard rates. This applies to each band of the property's purchase price.

Are there any exceptions to paying the additional stamp duty on second homes?

Yes, there are some exceptions. For example, if you're replacing your main residence and have sold your previous main residence within 36 months, you may be exempt from the additional 3% stamp duty. Another exception could be if the second home is worth less than £40,000, in which case no stamp duty is owed.

Can I claim a stamp duty refund if I sell my main residence after buying a second home?

Yes, if you pay the additional stamp duty but then sell your previous main residence within 36 months, you can claim a refund for the extra 3% you paid. You'll need to submit a claim form to HMRC within 12 months of selling the main residence or within 12 months of the filing date of the SDLT return, whichever comes later.

How does stamp duty work if I'm buying a second home for buy-to-let purposes?

If you're buying a second property specifically for buy-to-let, you'll still be subject to the additional 3% stamp duty. This is calculated based on the property's total purchase price, and you'll need to pay it within 14 days of completion.

What happens if I'm buying a second home jointly with someone who doesn't own any other properties?

If you're purchasing a property jointly and one of the buyers owns another property, the additional 3% stamp duty typically applies. There are complex rules around this, especially if you're married or in a civil partnership, so it's wise to consult a tax advisor to understand your specific obligations.