SDLT for Second Homes

Stamp duty liability for second home purchases has increased from 31st October 2024

Stamp duty for second homes

In her 2024 Autumn statement the chancellor announced an increase in stamp duty levels for anyone buying an additional property including second homes. Homeowners purchasing a second home now pay considerably more in stamp duty compared to home movers.

Second homes attract an additional SDLT surcharge even if they are not let out. With a much lower starting threshold of £40,000, most second home purchases attract an additional 5% stamp duty tax.

Moving house

Replacing a main residence

The higher rates of stamp duty should not apply if someone decides to move house. Even if someone owns two properties in the short term, they can apply for a refund of the higher SDLT rates once they sell their previous main residence. Final stamp duty liability will then be applied at the normal rate.

The Government will allow up to 3 years for the sale of the existing property to allow for any delays or difficulties with the transaction. Stamp duty will initially be charged at the higher rate for the new property, a stamp duty refund can then be claimed when the old home is sold.

If someone already owns more than one property, and they sell their main residence, they won’t have to pay the 5% stamp duty surcharge if they buy a new main residence within 3 years.

Claiming a stamp duty refund

After the sale of the original property it will be possible to claim a refund of stamp duty applied to the new property at the higher rate.

The refund must be claimed through the HMRC by completing a form called "Apply for a repayment of the higher rates for additional properties". The stamp duty refund must now be claimed within 12 months of the sale of the previous main residence.

If someone still owns their original home after 3 years, the higher rate of stamp duty will apply to the new purchase and a refund of stamp duty will not be possible.

Definition of a main residence

There are a number of determining factors for a property to be classed as a main residence. The HMRC may ask for evidence to confirm the following criteria:

1. The property is where the owner or their family spends their time.
2. If the owner has children of school age, which school they go to.
3. The address where the owner is registered to vote.
4. Where the property owner works.

Other factors may also be taken into account including the degree of furnishing of the property and the correspondence addresses given to third parties.

Property ownership

Married couples & civil partnerships

For the purpose of property ownership, married couples and civil partnerships are seen as one unit. This means that if one person already owns a property, any subsequent residential purchase by either person will be seen as an additional property for both individuals.

Married couples living separately, who are separated in circumstances that are likely to be permanent, will now be treated individually and not as one unit.

Unmarried couples & joint purchasers

The Government has confirmed the following position with regards to joint property ownership: "The joint purchase of a property that is an additional property transaction for one or more of the joint purchasers is considered to be the purchase of an additional property and thus the higher rates will apply"

For stamp duty purposes this means joint purchasers will be treated as one unit, the same as for married couples and civil partners.

Parents helping their children

If parents, who are homeowners themselves, wish to help their children buy their first home, they could now face the higher rate of stamp duty. In these cases, if the parents take out a joint mortgage with their children, they will appear on the deeds. Legally the parents would now own a second property.

However if the parents simply help with the deposit or act as a guarantor then the higher SDLT rates should not apply.

Limited companies

The SDLT surcharge will generally apply to additional property being purchased by limited companies. This applies to both existing companies and new companies formed for the sole purpose of purchasing an additional property.

Overseas property

Holiday homes

If someone owns property abroad, and wishes to purchase an additional property in England or Northern Ireland, they will now be liable for the higher SDLT rate.

However, if they already own a main residence in the UK in addition to their home abroad, it will still be possible to move house without being liable for the SDLT surcharge. This is on condition that the original UK main residence is sold within 3 years of purchasing the new home in the UK.

UK expats & foreign nationals

When applying the higher rate of stamp duty, foreign nationals resident in the UK are treated the same as UK residents. Non-UK residents, including UK expats living overseas, may need to pay a higher surcharge if they buy a UK property. More information can be found on our non-UK resident stamp duty page.

If someone owns another property anywhere else in the world and they decide to purchase an additional property in England or Northern Ireland, they will need to pay the stamp duty surcharge. This can be particularly relevant to UK Expats looking to move back to the UK after a spell overseas.

Additional property exemptions

Non residential property

The new higher stamp duty rates only apply to additional residential property. The following types of property, and land, are therefore exempt and would not be considered when determining ownership of additional property for stamp duty purposes.

1. Commercial property (such as shops or offices).
2. Agricultural land.
3. Plots of land (even where that land may subsequently be used for residential purposes)
4. Forests.
5. Any other land or property which is not used as a residence.

Mobile homes, caravans and houseboats are not classed as residential so these are also exempt when considering ownership of an additional property.

Inherited property

Stamp Duty does not apply to inhertited property so there is no SDLT to pay. If someone who has inherited a property then goes on to purchase another home this could be counted as an additional property.

If however someone has inherited a small share (50% or less) in a single property within 36 months prior to purchasing a new property, they should not be liable for the higher SDLT rate.

This exemption has been introduced to provide flexibility for purchasers who may find it difficult to dispose of a share in an inherited property.

Annexes

Generally Annexes are exempt from the higher rate of stamp duty as long as they are purchased at the same time as the main dwelling. This is on condition that the Annex itself is worth no more than a third of the total purchase value, and the annex lies within the grounds of the main home.