Stamp Duty on Second Homes: Everything You Need to Know

Whether you’ve just invested in an additional buy-to-let property, are adding to an already impressive portfolio – or have simply bought another house – navigating the rates of stamp duty on second homes can feel like a minefield. 

Overpaying stamp duty can quickly become a much bigger cost, which is something you’ll seriously want to avoid on those investment properties.

As you’ll already know, tracking these costs and additional charges can be pretty tricky, especially in an ever-changing property market.

We know that confusion and stress over the tax rules on second property purchases can catch our clients out – and that’s where we come in. 

Our team offers expert advice on all things SDLT for additional properties, coming straight from our pool of accountants, tax consultants, chartered surveyors, and solicitors. 

In this guide, we’ll cover everything you need to know about Stamp Duty Land Tax on your second home, touching on: 

Here are some topics we’ll discuss:

• What is Stamp Duty? 
• What the current Stamp Duty Rate is and how it applies to you 
• The rules around owning two or more residential properties
• What counts as a second home
• Who is exempt from paying additional Stamp Duty Rates
• How you can avoid overpaying 
• What Stamp Duty Claims can do for you 
• And much more! 

When it comes to successfully claiming back money that’s been overpaid to HMRC, Stamp Duty Claims has assisted thousands of people up and down the country maintain financial peace of mind.

We provide an unmatched no-win, no-fee service, helping clients secure a Stamp Duty Refund on second properties bought at any time over the past four years.

So if you’re unsure where to begin but believe you’ve paid excess stamp duty land tax on a residential property, we can help.

Let’s get started!

What is Stamp Duty?

If you’re a resident of Northern Ireland or England and are looking to add an additional property or piece of land to your portfolio, then you will likely pay Stamp Duty Land Tax on top of the property price. 

Residential property purchases or land sales are subject to Stamp Duty, a well-known tax.

There are, however, different thresholds that determine how much you’re expected to pay based on the price of your home. These stamp duty rates depend on where your purchase falls within ‘Stamp Duty Tax Bands’, as outlined by HMRC – which is something we’ll touch on later in the guide.

Essentially, homeowners are responsible for paying the applicable rates of SDLT in the following circumstances:

• buy a freehold property
• take on a new or existing leasehold
• buy a property through a limited company or business
• are transferred land or property in exchange for payment, for example when you take on a mortgage or buy a share in a house

So if you are looking over the accounts following your new and exciting purchase, it’s crucial to see whether you have paid the correct amount of SDLT. 

Otherwise, you might be missing a significant chunk of cash!

What happens if I don’t pay Stamp Duty – and how do I do it?

Paying your Stamp Duty is fairly straightforward. You just need to make sure your SDLT return is filed and paid within 14 days of completion when selling your home. 

Usually, your agent, conveyancer, or solicitor will be able to do this on your behalf – often adding the tax to their fees so you pay for their services in one lump payment. 

If not, you can file a return and make the tax payment yourself through the HMRC website. 

It’s important to remember that you could be penalised if you don’t file or pay the outstanding amount within the two-week time frame, with additional interest added.

How much stamp duty do I pay on a second home?

Any additional property you own – whether it’s a buy-to-let investment or another residence – will still be considered a second home. The same goes for properties bought for family members to stay in and holiday homes, which will all be classed as ‘second homes’ in the eyes of HMRC. 

So no matter how you plan to use it, if you have bought a second home or are actively adding to a property portfolio, it will likely be subject to a higher rate of stamp duty. 

In most cases, additional stamp duty applies if the property price is worth more than £40,000.

That also means you’ll have to pay this charge even if your current home is situated abroad or if you own a share in a property.

Of course, there are a few exemptions from SDLT on second properties.

A ‘movable’ dwelling, such as motorhomes, houseboats, or caravans, or a freehold property purchased for less than £40,000 won’t meet the stamp duty surcharge threshold.

However, it’s still important to keep an eye on standard rates of SDLT and other charges. 

What are the current stamp duty rates in 2022? 

If you’re looking to make a move to a new property while maintaining ownership of your existing property, then you should be keeping an eye on those residential stamp duty rates. 

Of course, rates differ depending on whether you are buying in England & Northern Ireland, Wales, or Scotland.

Although they have slightly different names – such as the Land and Buildings Transaction Tax in Scotland and Land Transaction Tax in Wales (for sales made after 1st April 2018) – both work similarly to SDLT.

HMRC has recently updated its conditions on the standard stamp duty rate, so if you are a non-UK resident, you will also have to pay a further 2% surcharge. This came into effect on the 1st April, 2021.

Currently, the rates of stamp duty in England and Northern Ireland are: 

Each ‘threshold’ is determined by the price of the property you’re aiming to buy.

So if your property falls under the designated amount, then you won’t have to pay the standard stamp duty rate – with the current SDLT rate for residential properties starting at £250,000. 

The threshold for non-residential land and properties is £150,000.

If you’re looking to see if you overpaid with an additional stamp duty rate on a second property purchase, you’ll need to remember that thresholds and rates were different before 23rd September 2022. 

Who is exempt from paying stamp duty?

Some people are automatically exempt from paying the standard stamp duty rate, while others can access ‘reliefs’, which reduce the amount of tax. 

As such, exemptions are available for certain people in selection circumstances, such as:

Some people are automatically exempt from paying the standard stamp duty rate, while others can access ‘reliefs’, which reduce the amount of tax. 

As such, exemptions are available for certain people in selection circumstances, such as:

• if the property in question is left to you in a will
• no money or other payment changes hands for a land or property transfer
• property is transferred because of the dissolution of a civil partnership or divorce
• you buy a freehold property for less than £40,000
• you buy a new or assigned lease of 7 years or more, in cases where the premium is less than £40,000 and the annual rent is less than £1,000
• you buy a new or assigned lease of fewer than 7 years, as long as the amount you pay is less than the residential threshold or non-residential threshold of SDLT
• you use alternative property financial arrangements, for example, to comply with Sharia law

In any of these circumstances, you don’t have to pay SDLT or file a return. 

Why do second homes and investment properties cost more in stamp duty?

Following the steady impact of the housing crisis, the Government felt that one way to mitigate the effect of private rent and the lack of affordable homes available was to introduce brand-new stamp duty rates and rules. 

In order to make buy-to-let properties and second homes less attractive investments for those looking to add to their portfolio, the government increased stamp duty on these ‘secondary’ residential properties.

This, combined with relief for first-time buyers (who were finding it particularly difficult to get a foot on the housing ladder) aims to leave more homes available for those just starting out. 

Of course, we have yet to see whether this move has had the desired effect – as it may make landlords increase their rates, making it even more difficult for those trying to stump up the cash for those all-important deposits.

What are the pros and cons of owning a second home? 

If you’re thinking of buying a secondary residential property in the UK, it’s worth looking at the pros and cons first. 

As with any financial investment, taking the plunge can not only put cash in your wallet but also take it away just as quickly – so take the time to weigh up whether a buy-to-let investment would suit your needs. 

Let’s have a closer look. 

Are there tax advantages to owning a second home?

Depending on the local authority and jurisdiction where your second home resides, you could potentially pay lower taxes. Second properties could enjoy a discount on council tax, with many holiday-home owners receiving a 10% reduction. 

How do I avoid stamp duty on a second home in the UK?

Getting your name off the title deeds can help you avoid stamp duty on second homes.

If you’re comfortable with your child or other family member owning the home, you can do this. Your choice might be to give them money, get a family offset mortgage (which allows you to place money in an account for a deposit), or be their guarantor.

You need to ensure that they will allow you to use the house as a holiday home if you want to. Remember, they own the house legally, so make sure you can use it as a holiday home when you want to.

In the next section, we’ll take a closer look at some of the most commonly asked questions and circumstances when it comes to Stamp Duty, helping you unpick when it applies. 

If a house is in my partner’s name, does this also make me liable for Stamp Duty? 

HMRC classifies a married couple or civil partners as one unit when calculating stamp duty. The second home stamp duty rate still applies if one owns a buy-to-let property and the other buys a property.

As such, the cost of buying another home for one partner can be high if you are separating and need to find another property for your ex-spouse.

What happens if I get divorced – will I have to pay the second home rate?

To accommodate this situation, HMRC has specific rules and processes in place to make sure everything runs smoothly. 

For example, if a ‘property adjustment order’ is in place when one partner decides to move out of the marital home, then additional stamp duty does not apply. This is because the home has been ‘handed’ over to the other partner. 

If one of these orders has not been organised, then you will have to pay the extra tax. However, you can claim a rebate if you go on to sell your share in the marital property within three years of moving out.

 A solicitor will be able to assist you with this. 

What if I’ve inherited my property?

When it comes to Stamp Duty, it often depends on individual cases and circumstances, with how much you’ll be expected to pay to rely on how much you have inherited. 

If someone has left a residential property in their will and has deemed you the sole owner, you’ll have to pay that additional rate of Stamp Duty if you decide to purchase another property. 

However, if you’ve only inherited a share of a house, you might be able to dodge SDLT. 

HMRC says that if you inherit 50% or less of a property and decide to buy another residential home within three years, you may be ‘exempt’ from that additional 3%.

Just make sure to seek professional advice on tax first, as HMRC may work on a case-by-case basis. 

Will I have to pay extra Stamp Duty if I’m buying a property for my children? 

As a general rule, if your name is going to be on the deeds and you own another property, then that additional stamp duty will apply.

However, there are a few ways you carry out the purchase without getting charged:

• Gift a deposit: When you gift a deposit, you won’t be charged stamp duty on second homes if you aren’t a joint owner
• Become a guarantor: Guarantors aren’t considered property owners. As a result, the additional rate will not apply to you
• Offset your mortgage: Offsetting your mortgage means putting your savings into a joint account with the lender. The funds act as a deposit, but you retain ownership.

This way, you can still buy a property on behalf of your children without forking out the extra tax.

I’m buying with a partner who owns an additional property. Is there anything we can do?

A second home stamp duty rate will be applied if anyone purchasing a property owns another. The only time this wouldn’t happen is if they are replacing their main residence.

However, this could be avoided if you aren’t in a civil partnership or married to one another, with the person who doesn’t currently own any property buying this new home in their own name. 

Of course, it’s important to bear in mind the impact it may have on your ability to pay the mortgage and who ends up benefitting from price rises in the future. 

Does the additional 3% Stamp Duty rate apply to leasehold extensions?

 As with any property purchase, lease extensions are subject to stamp duty. However, most people do not have to pay standard stamp duty because the threshold is £125,000.

A major problem with the second home rate is that it starts at a much lower £40,000. The additional stamp duty rate applies if you have other properties as well as the extension. The lease extension on your main residence, however, is exempt from this requirement.

How Stamp Duty Claims can help you with your second property

Here at Stamp Duty Claims, we are proud to provide a top-class and hassle-free service to clients up and down the country. 

Our team offers quality advice that can be relied on, which has been tried, tested and trusted by customers who need people to go the extra mile for their claim.

As such, our expert consultants have unmatched experience resolving SDLT overpayment cases with HMRC, and handle all the paperwork and documents to build a case.

Which cases do we take on?

As we touched on throughout this guide, there are approximately 49 different kinds of SDLT relief available when it comes to overpayments on a second home. 

At Stamp Duty Claims, our experts deal with a very specific type of claim when it comes to second homes – regarding ‘uninhabitable properties’ – which can lead to significant overpayments in tax. 

If you think your property was not fit for residential use but still paid SDLT, you can book an assessment call with us directly or raise your interest through our social channels. A member of the team will get back to you within 24 hours.

From here, we’ll ask you a few questions about your property and situation to see if we can help. 

These are just a few of the most commonly used issues we’ve been able to utilise in successful claims:

• Damp
• Asbestos
• Structural and Roofing Issues
• Mould Growth
• Insect infestations
• Faults with Electrics, Heating, and Water Supply
• Missing finishes, floorboards, utilities
• And more

Not found what you’re looking for? You can read the full list of examples here.

From here, we can see if your property meets the criteria for what is deemed an ‘uninhabitable’ dwelling. Once a case is confirmed, we can get to work and start putting a case together!

Our team will handle everything else once your solicitor provides a few relevant documents, such as title deeds and supporting evidence.

It’s just that easy. 

HMRC, Stamp Duty and ‘Uninhabitable Properties’

When it comes to deeming what is classed as ‘uninhabitable’ for second properties, we follow the caselaw presented in ‘PN Bewley Ltd vs The Commissioners for Her Majesty’s Revenue and Customs’. 

Stamp Duty overpayments on a recently purchased bungalow were the subject of a lawsuit in January 2019.

As a result of charges on the second property, they challenged the then-recent April 2016 SDLT, where taxation was calculated higher (in this case, 3%) on the purchase of:

• An individual’s additional dwelling
• A dwelling purchased by a company

The couple won the case, claiming back £6,000 on a £200,000 property as it was deemed unsuitable for living. 

This was due to the fact that the property had numerous problems and required further attention after purchase, meaning it should never have been considered a ‘dwelling’ at the time of buying. 

As a result, they had overpaid on Stamp Duty.

Because of the final ruling, we can now use this as a basis to help other people who have been wrongly charged higher rates of stamp duty for their second homes.

What can I expect from my claim? 

In most cases, it takes us four to six weeks to process your refund claim.

This spans the time from when our staff determines that your case qualifies for a rebate (and you approve our action!) – until HMRC delivers the return.

We know that you’ll be keen to see your hard-earned money back in the bank once the case has been won. That’s why we work tirelessly to provide extremely speedy reimbursements, often in as little as 30 days.

For further peace of mind, all of our claims are sent directly to the HMRC technical department to be handled there. Once submitted, we communicate frequently with these authorities up until a successful claim is authorised and approved.

If your claim is questioned or stopped, we make every effort to provide further supporting documentation within the 30-day window to keep things rolling. 

But with our guaranteed no-win, no-fee service, if the case is dismissed, you won’t have to pay a penny. We keep things simple and seamless for a reason. 

Why choose Stamp Duty Claims

We provide a service that is absolutely exceptional for you, your property portfolio and most importantly, for your wallet.

With our team of experts, you’re in safe hands from the moment you first submit your inquiry to the second you receive your rebate, giving you complete peace of mind throughout the process.

Everyone who satisfies the necessary requirements should be eligible to receive what they’re owed for Stamp Duty Land Tax overpayments (SDLT).

Do you think you may be in with a claim? 

Start your rebate journey with us today!