Stamp Duty and the Second Home Surcharge

If you’re buying a second home or investment property in England or Northern Ireland, you’ll usually need to pay an additional Stamp Duty Land Tax (SDLT) surcharge of 5%. This higher rate can add a substantial amount to the total tax due on your purchase.

Why Is There a Surcharge on Second Homes?

Since 2016, the government has applied a surcharge on additional residential properties to discourage multiple property ownership. As of October 2024, this surcharge increased from 3% to 5%.

You’ll usually pay the 5% surcharge if:

• The property costs more than £40,000
• You already own another residential property anywhere in the world
• You’re not replacing your main residence

This surcharge is added on top of the standard SDLT rates and applies across all price bands.

Example:

If you buy a £300,000 second home, the additional 5% surcharge alone adds £15,000 to your SDLT bill - on top of the standard SDLT due.

Exemptions to the Surcharge

There are limited circumstances where the 5% surcharge does not apply:

• Caravans, mobile homes, and houseboats
• Properties priced under £40,000 in value
• Annexes or granny flats that meet qualifying criteria (typically valued at less than one-third of the total property price)
• Properties purchased by charities or housing associations

Impact of Residency

Non-UK residents face an additional 2% surcharge, bringing the total potential extra charge to 7% (5% + 2%). This means international buyers can pay significantly more in SDLT than UK residents.

Ownership and Couples

• Single ownership: If only one buyer owns property and the other does not, this can affect the surcharge position - but legal advice is essential before structuring ownership this way.
• Joint ownership: Couples or partners buying together are generally treated as one “unit” for SDLT purposes, meaning the surcharge often still applies if either owns another property.

Selling Your Main Home and Claiming a Refund

If you purchase a new property before selling your old main residence, you’ll initially pay the 5% surcharge. However, you may claim a refund if you later sell your previous home.

To qualify for a refund:

• You must sell your previous main residence within 3 years of buying the new property
• Neither you nor your spouse/civil partner should still own the former main home
• Your refund claim must be submitted within 12 months of the sale (or within 12 months of the SDLT filing deadline, whichever is later)
• You’ll need to provide supporting documents such as sale contracts and proof of ownership

HMRC requires supporting documents like sale contracts and proof of ownership.

Why SDLT on Second Homes Can Be Complex

The rules around second home SDLT and surcharges can be complex and frequently updated. Mistakes - such as applying the wrong rates or missing valid exemptions - are common.

If you’ve recently bought a second home, it’s worth reviewing your SDLT calculation. You may be entitled to a refund or relief depending on your circumstances.