Buying a second property in the UK or Northern Ireland? Great! But one of the most important cost factors you need to know is the Stamp Duty on second home.
In the UK, buying a second residential property usually triggers a higher Stamp Duty rate. It is the tax you need to pay, and the rules for additional properties are stricter than for primary residences.
This blog explains Stamp Duty on second home, how it works, and what factors to consider before making your purchase.
Get in touch with our skilled professionals for expert UK tax and accounting solutions specialised to minimise your tax burden and resolve your financial challenges efficiently.
What is Stamp Duty?
Stamp Duty is a tax you pay to the government when buying property or land in England or Northern Ireland. This tax applies to both leasehold and freehold properties, whether you buy entirely or with a mortgage.
The amount you pay depends on several factors, such as:
- When you bought the land or property
- How much did you pay for it
- Whether you are eligible for an exemption or relief
Generally, SDLT is paid on properties costing over £125,000 (not the higher temporary thresholds that existed previously), with 0% up to £125,000. And, for first-time buyers, relief applies to properties up to £500,000, with no SDLT on the first £300,000.
It is best to use the Stamp Duty Land Tax (SDLT) calculator to estimate how much tax you will pay.
What is Stamp Duty on Second Home?
Stamp Duty on second home is the additional SDLT you must pay when you are buying a property that is not your main residence. This tax doesn’t apply to Wales and Scotland, as they have their own versions of the tax.
You will pay the Land and Buildings Transaction tax when buying a property in Scotland. And when buying property in Wales, Land Transaction Tax is paid.
What are the Stamp Duty Rates for a Single Property?
If you are buying your only property, then you don’t pay any tax on the first £125,000 of the property price. There is a zero SDLT rate. However, the rate increases to 2% for the next £125,000 (the portion from £125,001 to £250,000).
The table below shows the tax charged in steps:
| Transfer Value | Stamp Duty Land Tax |
| £125,001 to £250,000 | 2% |
| £250,001 to £925,000 | 5% |
| £925,001 to £1,5 million | 10% |
| Above £1.5 million | 12% |
If you are buying your second property or land, you are typically subject to a higher tax rate, called Stamp Duty on second home. You pay an extra 5% on top of these rates.
Check the official government website for residential property rates.
How Much is the Stamp Duty on a Second Home?
If you buy a second property in England or Northern Ireland, you pay more Stamp Duty. Higher rates apply when:
- Buying a property for £40,000 or more
- You already own another property anywhere in the world
- You haven’t sold your main home yet
You don’t pay higher rates if your second property costs less than £40,000. The table below shows the details of Stamp Duty on second home:
| Transfer Value | Standard Stamp Duty Land Tax (Main Residence) |
| Up to £125,000 | 5% |
| £125,001 to £250,000 | 7% |
| £250,001 to £925,000 | 10% |
| £925,001 to £1,5 million | 15% |
| Above £1.5 million | 17% |
What Counts as a Second Home?
In the UK, a property counts as a second home if you already own another residential property. This property can be anywhere in the world and is not replacing your main house. Additionally, you pay a higher rate of tax when you have a second home.
How Much Tax Will I Pay On A 2nd Home?
Under the Stamp Duty Land Tax, you pay an additional 5% on each price band compared to standard buyers.
Example
If you buy another piece of land or a home for £300,000, the Stamp Duty on second home you owe will be calculated as:
5% on the first £125,000 = £6,250
7% on the portion between £125,001 and £250,000 =£8,750
10% on the final £150,000 = £15,000
Total Stamp duty on second home = £30,000
What If I Own Property Abroad?
As mentioned above, if you have a home anywhere in the world, you still pay Stamp Duty. In the UK, SDLT rules apply globally. This means that if you already have a property overseas and buy a second home in England or Northern Ireland, you must pay Stamp Duty on second home. Also, you will have to pay a 5% extra surcharge on top of the SDLT rates.
What If I’m Buying a Property for My Children?
If you are buying a home for your children, you still have to pay Stamp Duty. The SDLT applies if you already own a property and the property is not replacing your main residence.
Even if your children live in it, ownership matters, nonetheless, if the home is purchased as the children’s main home and you do not have the ownership, standard SDLT may apply. There may not be a higher rate if it is their first property.
Furthermore, if you buy a home for a child under 18, it is considered your second home, and a higher rate applies. Conversely, if your child is over 18 years old and buys a home in their name, it is treated as a first-time purchase. They may be exempt from the higher rate and may be eligible for first-time buyer relief.
What is Stamp Duty on Second Homes For Non-UK Residents?
For non-UK residents, the tax rules are quite different. They pay an additional 2% tax when purchasing residential property in the UK.
Under the Stamp Duty Land Tax rules, “if a person is not in the UK for at least 6 months, during the 12 months before their purchase, they are not a UK resident for SDLT.”
Moreover, they may not have to pay a surcharge on certain properties, transactions, or if they are a particular type of buyer.
Can I Avoid Stamp Duty on a Second Home by Putting One Property in My Spouse’s Name?
No, you cannot avoid Stamp Duty on second home by making your spouse the owner of the other property. The UK tax rules treat civil partners or married couples as one financial unit for stamp duty purposes.
So, if you own a property, your partner is also considered the homeowner, and you must pay higher rates on your second home. However, when you are permanently separated, you may not have to pay higher rates.
What If I’m Buying With Someone Who Already Owns Property?
If you are buying a home with someone who already owns a property, you must pay a higher Stamp Duty rate on the whole purchase.
Under the SDLT, “if any of you individually have to pay the higher rates, you must pay the higher rates for the transaction as a whole.”
How to Avoid Paying Stamp Duty on Second Home?
You need to understand that you cannot legally avoid paying SDLT on a second home. In the UK, you must pay Stamp Duty Land Tax if you are buying a second home. The government normally applies the higher rates when you buy another property.
However, you can avoid paying a higher tax rate under a few situations:
Replacing Your Main Home
You may not have to pay SD on a second home if you sell your main home and buy another. However, if the sale happens after the purchase, you must pay Stamp Duty on a second home.
Transfer of the Property
In some cases, property transfers to one person due to the separation of a couple. In this case, you may not have to pay the higher rate.
Multiple Dwellings Relief
Buying a second property in a single transaction can also save you from paying higher rates of stamp duty land tax. Relief rules are complex and subject to change, so professional advice is recommended.
Can I Claim Back Stamp Duty on a Second Home?
You may be able to claim a refund if you paid the higher rate but later sold your previous main residence within 36 months of buying the new one. If you and anyone else you are buying with are buying your first home, you are eligible for a discount. You won’t pay any SDLT up to £300,000, and any 5% Stamp Duty on the portion from £300,001 to £500,000.
However, if your property’s price exceeds £500,000, you cannot claim the relief. To claim the relief, you must apply for the refund through HM Revenue & Customs (HMRC).
Speak to an Expert
Get in touch with our skilled professionals for expert UK tax and accounting solutions specialised to minimise your tax burden and resolve your financial challenges efficiently.
The Bottom Line
If you are planning to buy a residential property in the UK, you must learn about Stamp Duty on second home. This additional tax can significantly impact your overall costs. Therefore, you need careful planning. Whether you are buying a second home for personal use or investing in property, being aware of the rates, rules, and potential reliefs can help you make informed decisions.
Always consider seeking expert advice to ensure you are fully compliant and making the most cost-effective choice. Visit AccountingFirms to get the best accounting support. This platform helps you find qualified accountants in the UK. So don’t wait and connect with the best accountants today!
Disclaimer: All the information provided in this article on How To Avoid Stamp Duty on Second Home, including all the texts and graphics, is general in nature. It does not intend to disregard any of the professional advice.
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