Stamp Duty land Tax (SDLT), usually known simply as Stamp Duty, is a type of tax you must pay when you buy a property in the UK over a certain value. The amount you pay depends on how much the property is worth. Stamp Duty has different names in Scotland and Wales. There may be an additional Stamp Duty tax for people who buy second homes.
But do you have to pay on a second home? What if you only own the second home for a few weeks or days while a sale is going through? Here’s what you need to know.
Yes, in most cases you will need to pay an additional Stamp Duty on a second property. This is the case even if you are buying a percentage of a home, a second home as a buy-to-let investment, holiday home – and even if your only other home is not in the UK.
If this is your first property purchase, you will pay Stamp Duty for the property but you will not need to pay the additional for second homes. However, you will need to pay the additional Stamp Duty if you own property through inheritance or are buying the home with someone else who already has a property.
HMRC views civil partners and married couples as one entity and you will not be able to dodge the additional stamp duty if one of you already has a property by putting it in the other’s name only.
The rates you will need to pay differ between countries in the UK.
For example, in England and Northern Ireland, as of April 2021, you pay 0% Stamp Duty on a first property valued at £125,000 or below. But if this is your second property, you pay 3% Stamp Duty on a property valued at £125,000 or below. Later this year, the highest amount of Stamp Duty you can pay in England and Northern Ireland is 15%, while it is 16% in Scotland and Wales.
Consult the UK Government website for a full breakdown of rates.
There are a couple of times when no Stamp Duty will need to be paid on a second home. These are:
One of the most common questions is if people have to pay the additional second home rate if they are selling their only home but will only sell it days, weeks or months after the purchase of the second home.
There is good news and bad news. The bad news is you will have to pay the second home Stamp Duty tax initially. However, if the new property becomes your main residence and you do manage to sell your original home within three years, you can claim the additional Stamp Duty you paid on the second home back by contacting HMRC.
A professional UK accountant can help you with this.
If you have one home, that is your main residence. If you have two or more homes, HMRC decides. They base their decision on numerous factors, not limited to where your children attend school, and where you are registered to vote.
There have been special considerations made for events when a divorce is taking place and one partner is moving out into a new home they have purchased. If the divorce settlement includes a ‘property adjustment order’, the partner buying a second home will not be subject to paying the additional Stamp Duty for second homes.
If this is not in place, the property buyer will need to pay the additional tax. But this can be claimed back if they sell the share of their previous property within three years.
For further support navigating the tricky tax rules, speak to our team soon!