Stamp Duty Land Tax on the Second Home
If you’re purchasing a buy-to-let property or a second home in the UK, you’ll need to pay a stamp duty land tax surcharge. The stamp duty land tax (SDLT) surcharge on second homes is an additional 3% on top of the regular residential stamp duty rate you would pay. However, as is usual with taxes, there are certain rules and exemptions that apply.
Key points:
- You’ll have to pay an additional 3% on top of the normal SDLT rates if you end up owning two or more properties..
- You may not have to pay the higher rates if you exchanged contracts before 26 November 2015.
- You will not pay the extra 3% SDLT if you are replacing your main residence.
- A refund may be available if the previous main residence is sold within 3 years.
Stamp Duty Land Tax Rates and Surcharges on Second Home
How much stamp duty do I pay for a buy-to-let property? The additional stamp duty rate is payable on top of the regular stamp duty land tax rate that you pay on any property. So, you’ll pay more stamp duty for a buy-to-let property than you would normally if that buy-to-let purchase means you own two or more properties.
| Band | Regular residential SDLT rates | Residential rates with the extra 3% (total) |
| £0*-£125K | 0% | 3% |
| £125K-£250K | 2% | 5% |
| £250K-£925K | 5% | 8% |
| £925K-£1.5m | 10% | 13% |
| £1.5m+ | 12% | 15% |
Source: HMRC
As most people normally use one property as their primary residence, HMRC assumes that any second home is bought as an investment property – or a buy-to-let. However, the surcharge applies also to a holiday home or even another main residence, if the purchase price is over £40,000. Please note that owning a property abroad – or even a share in a property – also counts, and therefore the surcharge will be added to the standard stamp duty rate.
Related: A brief history of Stamp Duty Land Tax rates, reliefs and surcharges
Frequently asked questions about the second stamp duty land tax surcharge
When do I need to pay the SDLT surcharge?
You are required to pay the surcharge 30 days after the completion of the sale, normally paid at the same time you would pay the SDLT.
What is considered a “main residence”?
Your main residence for stamp duty purposes is the place where you and your family spend most of your time. This is not necessarily a property you own. HMRC will assess this by looking at where you work, where your children are registered at school and where you vote.
What if my main residence is abroad?
If you own a property abroad and want to buy an investment property in the UK, then the extra stamp duty rate will still apply.
What if the home I am buying replaces my main residence?
If the property you are buying replaces your main residence, you will not be liable for the 3% surcharge, even if you already own an additional property/properties at the time of purchase. However, you must demonstrate that the main residence will be sold or gifted away – if you own it.
What if I already have one property and I am buying a new one with someone who doesn’t?
Even if just one of you already owns a residential property (whether you are living in it or not), when you intend to buy another one together, the 3% stamp duty surcharge is likely to apply to the whole transaction. If you are not married or in a civil partnership, the person who doesn’t own the property can buy one alone to avoid paying the SDLT surcharge.
What if I’m a first-time buyer?
If you don’t already own any property and are looking to invest in a buy-to-let, then you won’t pay the additional stamp duty rate as you will only own one property. Note that you will not qualify for first-time buyer stamp duty relief as it can only be used for a property you intend to live in.
Can I avoid paying stamp duty surcharge on the second home?
There are a few instances where you won’t have to pay the SDLT surcharge or will be able to apply for a refund.
- The property you are purchasing is replacing your main residence immediately or within 36 months of the purchase date
- You are buying a second home for a family member – not yourself
- You are purchasing a property worth less than £40,000
- There is also an exemption if you purchase a Buy-to-Let property, which is the first and only property that you have bought.
Second-home stamp duty refunds
You can get a refund for your second home stamp duty surcharge if you demonstrate that you replaced your main residence with the new purchase. You have 36 months (or more in exceptional circumstances, such as the inability to sell your previous main residence due to covid-19 restrictions, but it’s not a rule) to sell or give away the previous property before applying for the second home surcharge refund online.
Stamp Duty Land Tax Refunds
Did you know that even if you don’t qualify for the second home surcharge refund, your overall SDLT bill might have been too high anyway? Overpaying Stamp Duty often happens because of the complexity of the Stamp Duty Land Tax (SDLT) rules, and a lack of knowledge of how to apply for all available reliefs on the part of the conveyancer you chose to act for you. Since SDLT is a self-assessed tax, people often overpay it, as underpaying can cause HMRC to impose a fine on you. There is a simple way to find out whether your transaction qualifies for a refund: This online SDLT Qualification Form!
