The rules on Stamp Duty for second homes

Key takeaways

• Second homes incur a 5% Stamp Duty surcharge on top of standard rates in most cases.
• The tax applies to additional residential properties, including buy-to-let and holiday homes.
• You may be able to reclaim the surcharge if you are replacing your main residence and sell your previous home within 36 months.

What is Stamp Duty on second homes?

Stamp Duty is a tax you pay when you buy property or land in England and Northern Ireland above a certain price threshold (£125,000). The amount you pay depends on the property’s value, your buyer status and whether the purchase is your main residence or an additional property.

 

When you buy a second home, such as a holiday property or buy-to-let, the Stamp Duty threshold is lower (£40,000), and you’ll usually pay an extra surcharge on top of the standard SDLT rates. This higher rate applies to most additional property purchases and is designed to reflect the fact that you already own another residential property.

Current Stamp Duty rates for second homes

In England and Wales, the current Stamp Duty rates for second homes are:

 

Property price band	Standard Stamp Duty rate	Stamp Duty rate for second homes
£40,000 to £125,000	0% (£0 to £125,000)	5%
£125,001 to £250,000	2%	7%
£250,001 to £925,000	5%	10%
£925,001 to £1.5 million	10%	15%
Over £1.5 million	12%	17%

How the second home surcharge works

The second home surcharge adds an extra 5% to the standard Stamp Duty rates. The standard SDLT rate on a property worth up to £125,000 is 0%. If you buy a second property, the 5% surcharge is added to this rate, meaning you would pay 5% SDLT.

For example:

If you buy a second home for £250,000, the Stamp Duty would be calculated as follows:

 

• 5% on the first £125,000 = £6,250
• 7% on the portion between £125,000 and £250,000 = £8,750
• Total Stamp Duty: £15,000

Who pays Stamp Duty on a second home?

The buyer is responsible for paying Stamp Duty on a second home. If you already own a residential property and buy another one, you’ll usually have to pay the additional 5% surcharge on top of the standard SDLT rates.

 

If you’re married or in a civil partnership, HMRC generally treats you as a single unit for Stamp Duty purposes. This means that if either of you already owns a property, the purchase of another property by either partner may be treated as a second home purchase and the surcharge could apply.

When is a property considered a second home?

Any property you buy after the one you already own (that isn’t replacing your main residence) is considered a second home. This could be any of the following property types:

 

• Holiday home
• Airbnb
• Buy-to-let or investment property
• Property bought to gift to a family member

Exceptions and refunds

There are some occasions where you may not have to pay Stamp Duty for a second home, such as:

 

• If you buy a property or piece of land for less than £40,000
• If a property was left to you in a will
• If you get divorced and your ex-partner transfers their share of a property to you
• If you’re buying a caravan, motorhome or houseboat

Replacing your main residence

If you buy a new home to replace your main residence, you’ll still need to pay Stamp Duty, but you may not have to pay the additional surcharge.

 

If you sell your previous main home before completing the purchase of your new one, the surcharge usually won’t apply. However, if you buy the new property before selling your old home, you’ll need to pay the surcharge initially. You can then apply for a refund from HMRC if you sell your previous main residence within 36 months of completing the purchase of your new home.

Stamp Duty for buy-to-let and investment properties

If you buy a property as a buy-to-let or investment, you’ll usually pay the higher rates of Stamp Duty. This means you pay an extra 5% on top of the standard residential SDLT rates.

 

If you buy through a limited company, you'll usually still pay the 5% higher-rates surcharge. However, companies can be subject to additional SDLT rules, including a potential 17% rate on some residential property purchases worth more than £500,000. Relief from this higher rate is often available for genuine property rental businesses, property developers and some other commercial activities.

 

Non-UK residents may also have to pay an additional 2% surcharge on top of SDLT rates when buying residential properties.

Additional costs to consider when buying a second home

As well as Stamp Duty, there are several other costs to factor in when buying a second home:

 

• Council Tax. Some councils charge higher Council Tax rates for second homes. In England, councils can apply a premium of up to 100%, while in Wales, councils can charge a premium of up to 300%.
• Capital Gains Tax (CGT). You’ll usually have to pay Capital Gains Tax if you sell a second home or buy-to-let property and make a profit.
• Insurance. Mortgage lenders will normally require proof of building insurance. You may also need specialist second home insurance, as standard home insurance policies often don’t provide full cover for properties left empty for long periods.
• Maintenance and utility bills. Ongoing costs such as repairs, servicing and utility bills can add up. You may still need to pay for gas, electricity, water, and broadband, even if the property isn’t occupied year-round.

Disclaimer:  

Our Guides and Inspiration blog aims to provide information you may find useful as you explore your homebuying options. However, the articles are for general informational purposes only and do not constitute professional financial, legal or mortgage advice. Speak with independent financial and legal advisers regarding your specific circumstances.  


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