Stamp duty surcharge should be considered when buying a second home for your own use or as a buy-to-let investment. In either case, since April 1, 2016, a stamp duty surcharge of three percent has been levied on second homes.
Stamp duty (stamp duty land tax or SDLT) – is a tax paid by homebuyers when they purchase property or land. For more details about the current SDLT rates see here: https://www.gov.uk/stamp-duty-land-tax/residential-property-rates
Second homes are homes other than the main residence whether they are let or not. It does not matter if the main residence is overseas because a second home in the UK will still be subject to the stamp duty surcharge. However, a buy-to-let property will not attract the higher rate if the main residence is rented, not owned.
The most common situations that need clarification:
- Homebuyers helping a family member to purchase a property will still be treated as second home owners liable for the surcharge.
- Anyone who have bought a new home, but not yet sold the old home, thus owning 2 homes, must pay the three percent surcharge. But, if the old home is sold within three years, the three percent is refunded.
- Moving into a new home, and then letting out the old one does not exclude the three percent surcharge.
- The surcharge does not apply in a case of a couple separated but not divorced owning 2 properties between them. However, couples living together, although not married, will not be able to avoid the surcharge even if one home is one partner’s name and one in the other’s.
- The stamp duty surcharge doesn’t apply to purchases of caravans, mobile homes or houseboats.
- A reduced stamp duty is possible to obtain in certain cases i.e. a second home residential and commercial purposes. In any case, this is best clarified by an accountant or mortgage adviser.