If you’re thinking of buying a second home – either as a bolt-hole from South London or as a buy-to-let investment – you should know about the extra stamp duty you will pay on your additional property. The amount of stamp duty you will pay could be a substantial sum if you’re buying in an area such as Clapham or Wandsworth. To help you understand the rules, we answer some frequently asked questions about stamp duty on second homes.
What is stamp duty?
Stamp duty land tax is a tax payable by anyone in England buying a property which costs more than £125,000. It’s been in the news a lot recently after the Chancellor’s stamp duty holiday, introduced in 2020 to kickstart the economy, which led to a boom in house sales. How much you pay will depend on the cost of your property – higher percentages are charged as you move up the price brackets. Stamp duty rates for single properties start at 2% and rise to as much as 12% – see the table below.
What about stamp duty on second homes?
If you buy an additional residential property costing more than £40,000 you will usually pay a stamp duty surcharge on top of the original charge. Currently the rates go from 3% to 15% on the most expensive properties. This rule applies whether you’ll live in the home or it’s a rental or a holiday home. It also applies if you already own a share in a property.
How much stamp duty will I pay in 2022-2023?
The stamp duty rates for 2022-2023 are:
| Purchase Price | Standard Rate | Buy to Let / Second Home Rate |
| Up to £250,000 | 0% | 3% |
| £250,001 to £925,000 | 5% | 8% |
| £925,001 to £1.5 million | 10% | 13% |
| Over £1.5 million | 12% | 15% |
How can I work out exactly how much stamp duty I will pay?
To work out exactly how much you will pay, based on your purchase price, use the stamp duty calculator on the gov.uk website.
Are any properties exempt from the stamp duty for second homes?
The only exemptions to the second home rule are properties costing less than £40,000 and mobile homes, caravans and houseboats.
Do I have to pay if I’m a first-time buyer?
If you’ve never bought property before, but plan to rent out the place as a buy-to-let, you won’t have to pay the surcharge. But if you keep the property and then decide to buy somewhere to live in, you will be liable. People who have never bought property but hold a share in a home because they’ve inherited it will still need to pay the surcharge.
Will I pay the extra stamp duty if I plan to live in my second home?
Yes. As long as the purchase you are buying will result in you owning two properties, you will pay the extra charge. However, if you are buying two properties because you are struggling to sell your original home, you can claim back the stamp duty paid, if you sell one of the properties within three years.
Will I still have to pay stamp duty on second homes if I own property abroad?
Yes, the charge will apply, even if you are buying your first home in the UK. This is also the case if you only own a share in the property abroad – such as a timeshare.
The property is in my partner’s name, do I still need to pay the extra charge?
If you are married or in a civil partnership, you are counted as one unit by HMRC, so the second home stamp duty rate still applies. If you are not married but live with a partner and only one of you owns property the other can buy a house in only their name and avoid the extra charge. However, this would have implications for both of you in terms of your mortgage application and if you separate. You are advised to get advice.
I’m moving out because of a divorce, do I have to pay the second home rate?
Married couples can get what is called a ‘property adjustment order’ if they are divorcing. This involves handing the home over to one partner and means that the additional stamp duty rate won’t apply. Without a property adjustment order you will need to pay the extra rate but you can claim it back if the the home is sold or your ex-spouse buys you out within three years.
I’ve inherited property do I have to pay the additional rate?
Yes, if you inherit a property or a share in one you will need to pay the additional rate, if you go on to buy a home without selling your inherited property.
Will I need to pay the additional rate if I take out a leasehold extension?
Stamp duty is payable on lease extensions, so you might. If the lease extension is on your main residence, and costs less than £125,000 you won’t pay stamp duty. However, if it is on your second home, and costs more than £40,000, you will pay the additional stamp duty rate.
Can I reclaim the stamp duty if I sell my home?
If you sell or give away your previous main home within three years of buying your new home you can apply for a refund on the additional stamp duty for second homes. But you can’t claim a refund if you or your spouse still owns part of your previous home.
Where can I find out more?
For more information about the higher rates for stamp duty on second homes, visit the gov.uk website.
If you are thinking of buying an additional property in South London, either as a buy to let or a second home, contact us for advice – we’d be happy to help.