Stamp Duty and the Second Home Surcharge

If you’re buying a second home or investment property in England or Northern Ireland, you will usually have to pay an additional Stamp Duty Land Tax (SDLT) surcharge of 3%. This can add a significant amount to the overall tax you pay.

Why Is There a Surcharge on Second Homes?

Since 2016, the government introduced a 3% SDLT surcharge on second properties. This applies if:

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

This surcharge is added on top of the standard SDLT rates and applies across each tax band, so the extra cost can add up quickly. For example, a £300,000 second home would typically incur around £9,000 in additional SDLT.

Exemptions to the Surcharge

There are some situations where the surcharge doesn’t apply:

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

Impact of Residency

Non-UK residents may face an extra 2% SDLT surcharge on top of the 3%, potentially bringing the total additional charge to 5%. This means international buyers can pay substantially more in SDLT.

Impact of Residency

• Ownership: If only one person owns the second home and the other does not own property, it may help avoid the surcharge, but this depends on personal circumstances and legal implications.
• Joint ownership: Some couples or partners may structure ownership to reduce SDLT, but this requires careful planning and professional advice.
• Selling your main home: If you buy a second home and sell your main residence within three years, you may be eligible for a refund of the 3% surcharge.

Impact of Residency

To claim a refund of the 3% surcharge:

• You must sell your previous main home within 3 years of buying the second property
• Neither you nor your spouse should still own the old main residence
• Claims need to be made within 12 months of the sale or 12 months after the filing deadline, whichever is later

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

Why SDLT on Second Homes Can Be Complex

The rules around the second home surcharge and related exemptions can be complicated and are subject to change. Errors in filing or missing exemptions are common, so it’s important to review your SDLT position carefully.

If you’re buying a second home or recently have, it’s worth checking your SDLT liability to ensure it’s correct and to explore whether you qualify for any relief or refund.