Published: 15/07/2024
What is Stamp Duty?
Stamp Duty Land Tax (SDLT) is a tax levied by the UK government on property and land transactions in England and Northern Ireland. It applies to both residential and non-residential property purchases. The rate of SDLT varies based on the property’s purchase price and the buyer’s status, such as first-time buyers, purchasing additional properties, or non-UK residents.
What About Stamp Duty on Second Homes?
An additional surcharge on top of the standard SDLT rates is applied for individuals purchasing a second home. This surcharge is intended to deter the purchase of additional properties for investment or secondary use, making more properties available for primary residences. This higher rate is an extra 3% on top of the existing SDLT rates, applicable on any property purchase over £40,000.
How Much is Stamp Duty on a Second Home?
The SDLT rates for second homes are higher than those for primary residences. The rates are as follows for second homes:
- £0 to £125,000: 3% (standard rate: 0%)
- £125,001 to £250,000: 5% (standard rate: 2%)
- £250,001 to £925,000: 8% (standard rate: 5%)
- £925,001 to £1.5 million: 13% (standard rate: 10%)
- Over £1.5 million: 15% (standard rate: 12%)
- 3% on the first £125,000 = £3,750
- 5% on the next £125,000 = £6,250
- 8% on the remaining £50,000 = £4,000
Example Stamp Duty Calculation For a Second Home
To illustrate the SDLT calculation for a second home, consider the purchase of a property priced at £850,000:
- 3% on the first £125,000 = £3,750
- 5% on the next £125,000 = £6,250
- 8% on the next £675,000 = £54,000
This example demonstrates the significant impact of the additional 3% surcharge on second homes.
When Must You Pay Stamp Duty on a Second Home?
SDLT is due within 14 days of the completion date of the property purchase. It is essential to ensure timely payment to avoid penalties and interest. The buyer is responsible for paying SDLT; the solicitor or conveyancer handling the transaction typically facilitates it.
Are There Exemptions To Paying Stamp Duty On Second Homes?
Several exemptions and reliefs may apply, reducing or eliminating the additional SDLT surcharge for second homes:
- Properties under £40,000: No SDLT is payable.
- Divorce or Separation: If the second home is acquired due to a divorce or separation and a property adjustment order is in place, the additional rate may not apply.
- Mixed-Use Properties: Properties with residential and commercial elements may qualify for mixed-use rates, which are lower than the residential surcharge rates.
- Replacement of Main Residence: If the second home becomes the main residence and the previous principal residence is sold within three years, the additional SDLT paid can be refunded.
- Social Landlords and Charities: Purchases by registered social landlords and charities may be exempt from the higher rates.
What Happens If You Don’t Declare Stamp Duty On Your Second Home?
Failing to declare and pay SDLT on a second home can have severe consequences. HMRC has robust systems to detect undeclared property transactions, leading to:
- Assessment of Unpaid Tax: HMRC will assess the unpaid SDLT and demand payment.
- Interest: Interest will accrue on the unpaid SDLT from the due date until the payment date.
- Penalties: Additional penalties may be imposed based on the severity and duration of non-compliance. These penalties can be substantial, adding to the financial burden.
Can I Claim Back a Second Home Stamp Duty?
Yes, you can claim the additional SDLT paid on a second home if the previous primary residence is sold within three years of purchasing the new property. This scenario typically occurs when there is a delay in selling the original home, resulting in the temporary ownership of two properties.
What Is The Stamp Duty Refund Process On A Second Home?
To claim an SDLT refund, follow these steps:
- Complete the Online Form: Visit the GOV.UK website and complete the SDLT repayment form.
- Provide Necessary Documentation: Submit details of the property transactions, including the purchase and sale dates of the properties and the SDLT reference numbers.
- Submit the Claim: Ensure the claim is submitted within 12 months of selling the previous principal residence or the filing date of the SDLT return for the new residence, whichever is later.
- Await HMRC Processing: HMRC will review the claim and process the refund if all conditions are met.
How Can Cavender Estate Agents Help?
Cavender Estate Agents, with offices in Guildford and Kingston Upon Thames, offers comprehensive services to help navigate the complexities of SDLT for second homes. Cavender Estate Agents will bring you:
- Expert Guidance: With over 50 years of combined experience in the property industry, Cavender’s highly trained staff can provide specialist advice on SDLT implications for second home purchases.
- In-House Services: All services are retained in-house, ensuring local expertise and personalised service.
- Community and Charity Engagement: Cavender is deeply involved in local community support, which enhances its understanding of local property markets.
- Property Sales and Lettings: Cavender offers a wide range of services, including property sales, lettings, and property management, ensuring all aspects of property transactions are handled efficiently.
- Client Support: Cavender’s team provides clear, honest, and concise advice to buyers, sellers, landlords, and tenants. Their customer-centric approach has earned them multiple awards and a loyal client base.