Second Home Stamp Duty

Buying a property is an exciting experience. But with the excitement comes a lot of paperwork and tax information that can be overwhelming and confusing. One of the most important taxes to understand is the Second Home Stamp Duty and its surcharge.

Stamp Duty Surcharge is a tax in the UK imposed on the transfer of land, property, or shares. It’s also known as Stamp Duty Land Tax or SDLT for short. The tax is based on the value of the property being purchased, and the amount varies depending on the property’s value. 

In this insight, we’ll explain everything you need to know about the Stamp Duty Surcharge, including what it is, how much it is, when it applies, how to calculate it and pay it.

Key Takeaways

• You need to pay the stamp duty surcharge if you are buying an additional property and not selling your main residence at the same time.
• The surcharge is currently set to an additional 3% of the property purchase price.
• If you do not simultaneously sell your home, you have 3 years to do so and claim a refund.
• Your conveyancer will pay the duty on your behalf and include the amount due in their invoice to you. It is payable 14 days after completion. 

What Is The Second Home Stamp Duty?

The Second Home Stamp Duty is a stamp duty surcharge. An additional tax rate needs to be paid when purchasing an additional or second property. If your transaction results in you buying an additional property to the one you have, you will need to pay the surcharge.

The surcharge amount you pay is a percentage of the value of the property you are buying. Stamp duty is only payable by the buyer of the property.

How Does The Second Home Stamp Duty Work?

On the 1st April 2016, the second home stamp duty surcharge was introduced to slow down house price growth and prevent houses from being snapped up by Buy to Let landlords. It was mainly introduced to help control the housing market. 

If you are buying an additional property you need to pay a surcharged rate of stamp duty. If at the end of the transaction, you own 2 or more houses and have not replaced your main residence, the higher rate of stamp duty will apply. It only applies to buying a property in England. 

The surcharge rate is currently set at 3%. Your total stamp duty is calculated as the 3% surcharge plus the normal rate of stamp duty you would pay for the value of the property you are purchasing. The normal rate of stamp duty you pay will depend on whether you are a first-time buyer, what part of England you are buying, and the purchase price of the property. 

Second Home Stamp Duty Example:

If you own the home you live in and purchase a Buy to Let property for £300,000. You will need to pay the regular stamp duty plus the surcharge.

This would be equal to 5% above £250,000 and an additional 3% surcharge across the full £300,000.

£50,000*5%=£2,500.00 + £300,000*3%=£9,000.00 

Total SDLT = £11,500.

How Is The Second Home Stamp Duty Paid?

After completing your purchase you have 14 days to complete a stamp duty tax return form and pay any stamp duty outstanding. Most of the time, your conveyancer will pay your stamp duty from the money on completion and this would have been accounted for as part of their invoice. 

Do I have to pay the Second Home Stamp Duty?

The stamp duty surcharge rules can be confusing and there is a lot of misinformation out there. We have put together a common scenario flow chart to help to see whether you need to pay the stamp duty surcharge or not.

Do I Pay Second Home Stamp Duty If I Am Replacing My Main Home?

No. If you are replacing your main residence on the same day that you buy your new property, you do not have to pay the surcharge. 

It is often the case that people may already own a Buy to Let property and be looking to upsize their main residence. This scenario does not require the surcharge to be paid. 

What If I Don't Sell On The Same Day?

You have up to 3 years to sell the property, and if you do you can obtain a refund from HMRC. However, you will need to pay the additional stamp duty surcharge upfront. This can create cash flow issues as you will need to account for finding the extra 3% before you can complete. 

What If A Couple Own Individual Properties Before They Buy Together?

If as a couple, you already own a property each, you will be treated as one person. If you decide to buy together you will need to pay the stamp duty surcharge unless you choose to sell both properties. This is because even if you replace a main residence, at the end of the transaction you will still own two or more properties. 

Stamp Duty Calculator

For more information on the stamp duty surcharge, you can read the gov.uk guidelines here

Stamp duty Land Tax is a tax payable when purchasing a property in England. If you are buying in Scotland or Wales you pay land & buildings tax or Land transaction tax respectively. Calculators are available to help you see how much you would need to pay:

• Stamp duty Calculator.
• Land and buildings Tax for Scotland calculator.
• Land transaction Tax for Wales.

Advice on Moving Home

If you're unsure about the second home stamp duty,  moving home, or buying a second property. Consider seeking mortgage advice. If you're unsure where to start, complete the Sunny Fact Find. The information you provide helps us to find the best-suited adviser for your needs. Your adviser contacts you for a no-obligation chat on how they can help. You decide how to proceed.