Stamp Duty on Second Homes: What You Need to Know

November 13, 2024

In the last decade, the number of second homes in England has increased by more than 50%, even despite stamp duty increases in 2024.

If you’re considering buying a second home, did you know that you’ll have to pay more stamp duty than you did when buying your first home? Understanding these costs before you buy, is crucial to budget effectively.

In this guide we break down everything you need to know about stamp duty on an additional property, including rates, exemptions and how it impacts your purchase, to help you make a more informed decision!

What is Stamp Duty?

Stamp Duty Land Tax (SDLT) is a tax paid on property purchases in England and Northern Ireland. It’s a tiered tax, meaning the rate you pay depends on the purchase price.

For your primary residence you pay a certain percentage of the purchase price in tax. For your second home, you pay that standard rate plus an additional 5%.

How Much Will You Pay?

To calculate how much stamp duty you’ll pay, you first need to work out how much you’d pay if it was your primary residence, then add the 5% surcharge.

Here’s a breakdown of the current rates for second homes in England and Northern Ireland:

It’s worth noting that stamp duty rates increased on 1st April 2025, and the figures above reflect the new updated rate. These rates apply to England and Northern Ireland. Scotland and Wales have their own Land Transaction Tax (LTT) systems.

Working Example:

If you purchase a second home for £300,000, the Stamp Duty calculation would be:

First £125,000: 5% = £6250

Next £125,000: 7% = £8750

Remaining £50,000 = £5000

Total Stamp Duty: £20,000

There’s no need to do the maths yourself, you’ll find a handy stamp duty calculator here!

When Does the Additional Rate Apply?

The additional 5% rate applies when you purchase a residential property and already own another. This includes buy-to-let and holiday homes. It all boils down to owning another residential property, even if you’re not currently living it in.

There are however some exemptions and reliefs that might apply to you. It’s important to understand them, as they could save you a significant amount of money!

Exemptions include:

• If you’re selling your main residence and replacing it with another, the additional surcharge might not apply, provided certain conditions are met, such as selling your previous main residence within a specific timeframe (currently three years).
• Some types of property, such as caravans or mobile homes, might not be considered residential properties.
• Properties below a certain value may be exempt.

It’s so important to seek advice from a legal professional, as the exemptions can be complex.

How to Minimise Your Stamp Duty Costs

While you can’t avoid stamp duty altogether, there are some strategies that might help reduce the amount you pay:

• Buy a Lower Priced Property: As this is a tiered tax, buying a cheaper property means you pay less stamp duty. 
• Haggle: Alternatively, negotiating hard with the seller on the asking price at the start (or letting us do that for you!) can help you save money in the end.
• Timing: If you’re in a position to buy your second home quickly, then you could save money if the transaction goes through before the single property stamp duty rate increases on 1st April 2025.
• Exemptions: Ensure you understand all available exemptions and whether you qualify.
• Apply for a Refund: If you buy a second home, pay your stamp duty, then decide to sell your first one (within three years), you may be able to get a refund on some of the stamp duty you’ve paid.
• Professional Advice: Working with a solicitor or tax advisor can help you identify potential savings and ensure you’re fully informed about your obligations. They can also advise on the specific rules and regulations that apply to your situation.

FAQs

At Simon Blyth here are a few questions we’re frequently asked about stamp duty on second homes:

Q: Does the additional stamp duty apply if I inherit a property?

A: The situation with inherited properties can be complex. Whether the additional Stamp Duty applies to a second home you purchase after inheriting a property depends on the specific circumstances of the inheritance. It’s best to consult a legal professional for advice.

Q: What if I don’t pay the correct stamp duty?

A: Failing to pay the correct Stamp Duty can lead to penalties and interest charges.

Q: Can I include the stamp duty in my mortgage?

A: Some lenders may allow you to add stamp duty to your mortgage, but this is not always the case. It’s best to discuss this option with your mortgage provider. Adding the stamp duty to your mortgage will increase the overall amount you borrow and, therefore, the total interest you pay.

Q: I’m buying a property with my partner who already owns a home?

A: If one of you already owns a property, the additional stamp duty might apply even if the other partner is a first-time buyer. The rules regarding joint ownership can be complex, and professional advice is highly recommended.

What this Means for Investors

The increased stamp duty can significantly impact the overall cost of your investment. 

Buy-to-let investors should factor stamp duty into their financial planning to avoid surprises when purchasing additional properties.

We Can Help!

Remember that the information provided here is a general guide, and individual circumstances can vary.

If you have questions about stamp duty or second home purchases, our expert team is always on hand for advice.

Get in touch for a chat!

Sources:

https://www.telegraph.co.uk/news/2023/09/09/second-home-surge-decade/