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What is Stamp Duty?
Stamp Duty, officially known as Stamp Duty Land Tax (SDLT), is a tax you pay to the government when you buy a property above a certain value in England and Northern Ireland. The threshold is currently set at £250,000 for residential properties, although this is different for first time buyers, additional properties and if you are not a UK resident. There are similar Stamp Duty policies in Scotland and Wales. With all of these rules, the percentage of Stamp Duty you pay increases as the property goes up in value. But what is Stamp Duty on second homes, and how does it differ from standard Stamp Duty?
When do you have to pay Stamp Duty on a second home?
Stamp Duty rules are different for those buying a second home.
If you already own one property but are buying another, the Stamp Duty threshold is lower. If the second property is worth more than £40,000, you’ll have to pay Stamp Duty for second homes.
You’ll also pay a higher percentage of Stamp Duty when you’re buying an additional property. This is known as the Stamp Duty surcharge. In England and Northern Ireland, this is set at 3%. Whereas in Scotland and Wales, it’s 4%.
What counts as a second home?
The term ‘second home’ can seem vague. So, it’s important to clarify what exactly qualifies as a second home. Essentially, a second home is any property you purchase beyond the one you already own. This could be a:
- Buy to let property.
- Holiday home.
- Property bought as a family gift.
What if the property is overseas?
It doesn’t matter if the home you are buying is overseas. You’ll still need to pay Stamp Duty when buying a second home abroad. So, if you own a family property in England, but you buy a holiday home in Greece, you’ll still have to pay the tax.
However, this doesn't apply to caravans, mobile homes or houseboats.
How much is Stamp Duty on a second home?
The idea of Stamp Duty, a land tax paid to the Government on the purchase of a property, exists across the UK. But it’s only in England and Northern Ireland where it has the specific name of Stamp Duty Land Tax or SDLT.
There are different rules in Wales, where Stamp Duty is known as the Land Transaction Tax. In Scotland, it’s dealt with under the Land and Buildings Transaction Tax. So, if you’re considering what Stamp Duty could be on a second home, it depends where you’re buying the property.
How much more tax you pay – the Stamp Duty surcharge – also differs across the UK. In England and Northern Ireland, it’s an extra 3%. Whereas in Scotland, you’ll pay 4% more.
England and Northern Ireland
On second properties with a purchase price between £40,000 and £250,000, you pay 3% Stamp Duty. Then:
- Between £250,001 and £925,000, you pay 8%
- Between £925,001 and £1.5m, you pay 13%
- Over £1.5m, you pay 15%
On second properties with a purchase price of up to £145,000, you pay 4% Stamp Duty (called LBTT in Scotland). Then:
- Between £145,001 and £250,000, you pay 6%
- Between £250,001 and £325,000, you pay 9%
- Between £325,001 and £750,000, you pay 14%
- Over £750,000, you pay 16%
On second properties in Wales with a purchase price of up to £180,000, you pay 4% Stamp Duty (called LTT in Wales). Then:
- Between £180,001 and £250,000, you pay 7.5%
- Between £250,001 and £400,000, you pay 9%
- Between £400,001 and £750,000, you pay 11.5%
- Between £750,001 and £1.5m, you pay 14%
- Over £1.5m, you pay 16%
Buy to Let Mortgages
A common reason for buying a second home is to rent out this property. If you are looking for our best Buy to Let rates you can view the rates that we offer here. NatWest mortgages are available to over 18s. Your property may be repossessed if you do not keep up repayments on your mortgage.
Can I claim back second home Stamp Duty?
You pay a higher rate of Stamp Duty when buying a second home. But you can claim this back in some circumstances. In England and Northern Ireland, you can apply for a refund for the additional 3% you paid in Stamp Duty if you’ve sold what was previously your main home.
The main example of when this might happen is when you’re moving house and you buy your new home before selling your old one. Technically, you own two properties. The original home is seen as your main residence. The new home is therefore an additional property, and subject to the higher rate of Stamp Duty as a result.
When you sell your original home, the new property then becomes your main home. After this, it is no longer subject to the higher rate of Stamp Duty. You may be able to claim this back as a refund, provided you do so within three years.
The rules differ depending on whetehr your property was sold before or after 28th October 2018. Read more about second home stamp duty rates.
How to claim back stamp duty
To claim back the additional Stamp Duty when a second home becomes your main residence, you need to:
Gather the paperwork – You’ll need your details, the details of the property you’re claiming back for, and information on the property that was previously your main residence. You’ll also need details of the tax you paid on the property and what you’re trying to claim back.
Create a Government Gateway ID – To claim for the repayment, you’ll need to complete an online form at GOV.UK. To do this, you’ll have to create a Government Gateway user ID.
With your paperwork gathered, you can use your Gateway ID to log in to GOV.UK and complete the SDLT repayment form. Or you can complete the form on-screen, print it and send it to HM Revenue and Customs via post.
Are there any Stamp Duty exemptions?
If you’re buying a second home, you should expect to pay Stamp Duty as part of the deal. It’s an essential part of the process when buying property in the UK, after all. But there are exceptions. You may be exempt from paying Stamp Duty in certain situations. You might not have to pay stamp duty if:
- The property is left to you in a will.
- You become the property owner after a divorce or dissolution of a civil partnership.
- You buy a freehold property worth less than £40,000.
- You buy a seven-year (or over) lease for less than £40,000 with annual rent below £1,000.
- You’re buying a caravan or motorhome of any value. The same applies to houseboats.