Stamp Duty on Second Homes

(2 Minute Read)

How much Stamp Duty do I need to pay?

What is it?

Stamp Duty Land Tax (SDLT) is a tax paid when you purchase a property over a certain value.

In April 2016 the Government added a 3% surcharge on SDLT for second homes.

The 3% surcharge doesn’t apply to the total SDLT, but to each tax band when the property falls into.


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How does it work?

From the 1st July 2021, the Stamp Duty holiday will be over, meaning that the tax rates for SDLT will return to normal.

These tax rates will be:

  • zero SDLT on property values up to £250,000
  • 5% on property values from £250,001 to £925,000
  • 10% on property values from £925,001 to £1.5 million
  • 12% on property values over £1.5 million

The 3% surcharge does not apply to a total figure, but adds 3% to each of these tax rates, including changing the zero rate to 3%.

This means a second property sold for £250,000 will have £7,500 to pay in SDLT, where a main residence would have nothing to pay.

If you own a property abroad, and are now seeking to purchase a property in the UK, this surcharge would apply to you.

If a couple is buying a property together, and one of them already owns a property, then this surcharge will apply to the whole amount.



Examples

How and when the surcharge is implemented can be quite complicated, so here are a few examples.

Andy owns a buy-to-let property, and then buys a home to live in himself. The 3% surcharge will apply to this because he will end up owning 2 houses.

Rosie and Jim jointly buy a house to live in. Rosie already owns a buy-to-let property. This means 3% surcharge applies. The surcharge applies to the whole amount, even though Jim doesn’t own a house.

Don Pedro own a house in Mallorca. He is now looking to purchase a house in his native Burnley. This property would be subject to the 3% surcharge, even though one property is in Spain.

Commander Harris owns 11 properties.  He buys a house in which to live, to replace his previous Private Residence. If he has disposed of the residence, then no surcharge applies. If he keeps his old house the 3% surcharge applies, but if he then disposes of the property within 3 years, HMRC will make a refund.


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Anything else?

The current SDLT holiday, which ends on the 30th June 2021, raises the zero tax rate to £500,000.

This includes second homes, saving you up to £15,000, meaning now could be a great time to buy.


Kind regards Ilyas

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