There are so many different Stamp Duty rates that it can be hard to identify how much you’re liable to pay. In this guide, we’ll explain everything you need to know about paying Stamp Duty on a second property.
You pay Stamp Duty Land Tax when you purchase a property or land over a certain value in England and Northern Ireland. If you buy a property which will function as your only main residence, you pay Stamp Duty at the basic rate. If you buy a second home or a buy-to-let property, you pay Stamp Duty at the basic rate plus a 3% surcharge on each band.
You’re liable to pay the surcharge even if the property you currently own is a holiday home abroad and you’re now buying your first property in the UK. It doesn’t matter whether you own a freehold or leasehold, a shared ownership property, or are a joint owner of your previous home – you’ll have to pay additional Stamp Duty on your new one. What’s more, it’s irrelevant whether you actually bought your previous property or were added to the title deeds later on - you technically own a property, therefore any new property you purchase will be a second one.
The Stamp Duty Tax rates for second homes and buy-to-let properties are the same because they both qualify as second residences.
Second Home Stamp Duty Rates
If you’re buying a second residence or a buy-to-let:
You’ll pay a 3% Stamp Duty surcharge on top of the standard Stamp Duty rate.
|Band||Old Stamp Duty Rate||New Stamp Duty Rate|
|£0* - £125k||0%||3%|
|£125k - £250k||2%||5%|
|£250k - £925k||5%||8%|
|£925k - £1.5m||10%||13%|
You’re purchasing a second home for £700,000. The maximum rate of Stamp Duty you’ll pay is 8% but this is only for the portion of your property value over £250,000, i.e. £450,000. You pay some Stamp Duty at 3%, some at 5% and some at 8%.
- 3% on the first £125,000 of the £700,000 = £3,750
- 5% on the next £125,000 of the £700,000 (the portion from £125,001 - £250,000) = £6,250
- 8% on the final £450,000 of the £700,000 (the portion from £250,001 - £925,000) = £36,000
Total SDLT = £46,000
Exemptions for Second Home Stamp Duty
You’re only exempt from the Stamp Duty on a second home if:
- You purchase a property valued under £40,000, or the share of the property you buy is valued under £40,000
- You buy a caravan, mobile home or house boat
Even if you’re not exempt from paying Stamp Duty on a second property, you can sometimes claim back the Stamp Duty surcharge.
If you purchased a new main residence without selling your previous one, you would have effectively purchased a second home. Therefore, you would have likely paid second home Stamp Duty, i.e. Stamp Duty at the basic rate plus the 3% surcharge.
If you then sold your old property within 3 years of purchasing your new one, you may be entitled to a refund on the surcharge.
This is useful for people who sometimes struggle to sell their previous residence or those who need to relocate quickly.
For more information on Stamp Duty exemptions, see our guide: What is Stamp Duty and Is It Refundable?
What About First-Time Buyers?
A first-time buyer can’t technically purchase a second home. It’s also incredibly hard to find a lender willing to give a first-time buyer a buy-to-let mortgage. Nonetheless, if you’re a first-time buyer who does manage to purchase a buy-to-let property, you’ll pay Stamp Duty at the basic rate; you won’t pay the 3% surcharge. However, you won’t qualify for the first-time buyer’s Stamp Duty exemption as it’s only applicable to main residences.
Other Taxes on Second Properties
Stamp Duty is the only tax you’ll pay on a second home at the time of purchase. However, you’ll have to pay Council Tax for the period you own the property.
Any other taxes you pay on a second home will depend on what you use the property for and if you sell that property.
If you rent out a second property as a buy-to-let, you may have to pay Income Tax on your rental income. Learn more about this in our guide: Rental Income and Other Landlord Taxes.
If you sell your second property, you may have to pay Capital Gains Tax.