If you’re considering buying a second home, you should know about the extra stamp duty you will pay on your additional property. Maybe you are considering purchasing a London pied-à-terre for when you are in the city, buying a property for your children while they are studying or working in London or investing in buy-to-let.
The amount of stamp duty you will be required to pay could be substantial if you’re buying a second home in an area such as Balham, Battersea, Clapham or Wandsworth, as house prices in these areas are higher than the UK average. To help you understand the rules surrounding stamp duty land tax (SDLT) and how much you will be required to pay, we answer some frequently asked questions about stamp duty for second homes.
What is stamp duty?
Stamp Duty Land Tax (SDLT) is a tax payable by anyone in England and Northern Ireland buying a property which costs more than £250,000 (the threshold is due to return to the previous rate of £125,000 from 31 March 2025). You will pay the standard rate when you purchase a property that will function as your main and only residence. Higher rates will apply if you are buying a second home or are an overseas buyer.
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 start at 3% and rise to as much as 15% – 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 pay the standard rates plus a stamp duty surcharge of 3% on each band. This applies if you already own a property and are buying another. Property purchases regarded as second homes include buy-to-let properties and holiday homes. Property bought as a family gift, such as a house or flat for your child, will also be regarded as a second home if the deeds are in your name.
How much is stamp duty on a second home?
The stamp duty rates in England and Northern Ireland are:
Purchase Price | Standard Rate | 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% |
To work out exactly how much you will pay, based on your purchase price, use the stamp duty calculator on the gov.uk website.
Example stamp duty calculation for a second home in Battersea
For example, if you already own a property and buy an additional property in Battersea for £850,000, you will pay the following stamp duty.
3% on the first £250,000, which is £7,500
8% on the amount above £250,000 (so 8% of £600,000), which is £48,000
The total stamp duty would be £7,500 + £48,000, which is £55,500
Are any properties exempt from stamp duty?
There are very few exemptions to stamp duty on second homes. Properties worth less than £40,000 are exempt from second-home stamp duty tax. However, this is unachievable in South West London, where average house prices are around £995,500.
The following types of properties are exempt from stamp duty: mobile homes, caravans and houseboats.
Do I have to pay if I’m a first-time buyer?
By definition, first-time buyers can’t purchase a second home. If you buy your first (and only) property as a buy-to-let, you will pay the standard stamp duty rates as you will only own one property. First-time buyers purchasing a buy-to-let will not qualify for first-time buyer tax relief.
However, if you subsequently buy somewhere to live in, you will be liable to pay the surcharge, as you would then own two properties.
If you are buying with someone who already owns a home, you will be liable for the second-home surcharge.
What if I own property abroad?
The second home surcharge will apply even if your only other property is abroad, such as a holiday home or timeshare.
Overseas buyers have an additional 2% surcharge over the standard rate and the second home surcharge. This means in addition to the standard rate they pay, there will be 5% surcharge for non-UK residents buying a second home.
I’ve inherited property, do I pay the additional rate?
Yes, if you inherit a property or a share of over 50%, you will pay the second home surcharge if you buy a home without selling your inherited property. However, you will not need to pay stamp duty when you inherit the property, but you will on any future property purchases resulting in owning two properties.
If you have inherited 50% or less of a property, you may be exempt from paying the surcharge when you buy a residential property within three years of inheriting your share in the other property.
Does the surcharge apply if I don’t own a property, but the person I am buying with does?
If you are married or in a civil partnership, you are counted as one unit by HMRC, so the second home SDLT rate still applies.
If you are not married but live with a partner and only one of you owns a property, the other can buy a new house in only their name and avoid the extra charge. However, this would have implications for both of you regarding your mortgage application and if you separate.
Will I pay the surcharge if I plan to live in my second home?
Yes, if the home you buy will result in owning two properties, you will pay the extra charge. However, if you purchase a second property and go on to sell your original home within three years, you can reclaim the second home surcharge you paid.
You can claim a repayment of SDLT by using the online form on the gov.uk website. To do this, you must have a Government Gateway user ID, password, and property details, including the purchase date and the SLDT transaction reference number. It is also possible to apply by post.
I’m buying a new home because of a divorce; do I have to pay the second home rates?
Married couples can get a ‘property adjustment order’ if they divorce. In this case, the ownership of the marital home is transferred to one party during divorce proceedings, and the other party can buy a new home without paying the second home surcharge.
Without a property adjustment order, the person buying a new home will need to pay the additional rate. However, it may be possible to claim a refund if they subsequently sell their share of the marital home.
I am buying a property for my children; will the surcharge apply?
Yes, if you already own a property and buy one for your children and the deeds are in your name, you must pay the second home surcharge.
However, there are some solutions for avoiding the surcharge, such as:
– Acting as a guarantor for your child instead of taking out a mortgage in your name. This way, it will be their name on the deeds, and they own the property.
– Gift a deposit for the property to help your children meet the affordability criteria for their mortgage.
– Take out a family-offset mortgage to pay for the deposit, which offsets your savings against your child’s mortgage.
Will I need to pay the additional rate on a leasehold extension?
Stamp duty is payable on lease extensions, so you might. You won’t pay stamp duty if the lease extension is on your primary residence and costs less than £250,000. However, if it is on your second home and costs more than £40,000, you will pay the additional stamp duty rate.
If you are considering 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.