Stamp duty on a second home

If you’re buying a second home that you won’t be living in, you’ll be charged an additional rate of stamp duty. The amount you pay depends on the property value and where you live in the UK. We explain the rules for second homes, look at coronavirus stamp-duty cuts and see if you can legally avoid paying stamp duty.

If you’re buying a second home that you won’t be living in, you’ll be charged an additional rate of stamp duty. The amount you pay depends on the property value and where you live in the UK. We explain the rules for second homes, look at coronavirus stamp-duty cuts and see if you can legally avoid paying stamp duty.

Mark Gordon
From the Mortgages team
4
minute read
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Posted 6 JULY 2021

Stamp duty holiday due to coronavirus

A stamp duty holiday was introduced in July 2020 in a bid to kick-start the housing market, as part of the Government’s response to the COVID-19 pandemic.

The tax cut, which applies to homes bought in England and Northern Ireland from 8 July 2020, was scheduled to end on 31 March 2021, but has been extended until 30 June 2021.

From 1 July to 30 September 2021 the tax relief rate will taper off in stages, before reverting to what it was before the holiday, on 1 October 2021.

The measure applies to second homes and buy-to-let properties, although people buying these additional properties will still have to pay a surcharge on top of the temporary rates.

Who has to pay stamp duty on a second home?

With a few exceptions, anyone buying an additional residential property has to pay stamp duty. On second homes bought in England and Northern Ireland, there is a 3% surcharge on top of the basic stamp-duty rate, while similar rules apply in Scotland and Wales (see below). The surcharge applies to any of the following:

  • A holiday home
  • A buy-to-let property
  • A home you own a share in, if your share is worth £40,000 or more
  • A property you buy in the UK, if your main home is abroad
  • A second home bought via a limited company

How much is stamp duty on a second home?

Second-property stamp-duty rates are the same in England and Northern Ireland, but different if you’re buying a property in Scotland or Wales.

England and Northern Ireland

This table shows the stamp duty rates for second homes in England and Northern Ireland from 8 July 2020 to 30 June 2021.

Property value

Standard stamp duty rate

Additional property stamp duty rate

Up to £500,000

0%

3%

£500,001 – £925,000

5%

8%

£925,001 – £1.5m

10%

13%

£1.5m+

12%

15%

 

Stamp duty for second homes from 1 July 2021 to 30 September 2021:

Property value

Standard stamp duty rate

Additional property stamp duty rate

Up to £250,000

0%

3%

£250,001 – £925,000

5%

8%

£925,001 – £1.5 million

10%

13%

£1.5m+

12%

15%

 

Stamp duty for second homes from 1 October 2021:

Property value

Standard stamp duty rate

Additional property stamp duty rate

Up to £125,000

0%

3%

£125,001 – £250,000

2%

5%

£250,001 – £925,000

5%

8%

£925,001 – £1.5m

10%

13%

Over £1.5m

12%

15%

Scotland

The Land and Buildings Transaction Tax (LBTT) holiday in Scotland ended on 1 April 2021.

Buyers of second homes in Scotland have to pay the ‘Additional Dwelling Supplement’ on top of the LBTT. This is 4% on the purchase price of properties over £40,000.

Property value

Land and Buildings Transaction Tax rate

Additional Dwelling Supplement

Up to £145,000

0%

4% of purchase price of property

£145,001 – £250,000

2%

£250,001 – £325,000

5%

£325,001 – £750,000

10%

Over £750,000

12%

Wales

Temporary cuts in Land Transaction Tax (LTT) rates in Wales haven’t been extended to second homes.

Property value

Standard LTT rate after 1 July 2021

Higher residential rate

Up to £180,000

0%

4%

£180,001 – £250,000

3.5%

7.5%

£250,001 – £400,000

5%

9%

£400,001 – £750,000

7.5%

11.5%

£750,001 – £1.5m

10%

14%

£1.5m+

12%

16%

Are any homes exempt from stamp duty for second homes?

There are exceptions but, typically, you’ll have to pay the tax on most second properties. But you won’t have to pay the additional stamp duty rate on:

  • Caravans, mobile homes or houseboats irrespective of how much you pay for them
  • A home you’re going to live in, provided you’ve sold your existing property (more about this below…)

What if the home I’m buying will be my main residence?

If you’re intending to replace your main residence with the property you’re purchasing, you won’t have to pay the additional stamp-duty rate. But you must have sold your existing home to qualify for this exemption.

If you haven’t sold your previous main residence by the day of completion on your new home, you’ll have to pay the second property tax. That’s because you now own two properties.

But the good news is that you can apply for a second-home stamp-duty refund if you sell your previous main home within 36 months.

How to avoid stamp duty on a second home

There are ways to legally avoid stamp duty on a second home in the UK, although you should always be careful not to break the rules.

  • Stamp duty is not normally payable on properties that are inherited, although inheritance tax may still apply. You’ll have to pay additional stamp duty if you buy another residential property
  • You’re exempt if the property has been transferred following a divorce or separation after the end of a civil partnership
  • If you’re buying a home for your children, you can gift the deposit. As long as you’re not the joint owner of the property, the second-home stamp-duty surcharge won’t apply
  • Guarantors for a mortgage are not classed as property owners so will avoid the additional rate

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