How To Avoid Stamp Duty On A Second Home

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John Brady

John Brady

John is a property writer here at RWinvest. With a close eye on property market news and updates, John writes detailed and informative articles on a range of topics that are helpful for anybody looking to invest in UK property.

If you’re fortunate enough to be considering purchasing a second home, you need to be aware of stamp duty land tax, or SDLT. 

This is a tax you pay to the government if you purchase a piece of land, leasehold, or freehold property. 

You only pay stamp duty tax if the property is worth over a certain value, which can change depending on where you are in the UK. 

This tax gets increasingly higher the more the property is worth, so you may find yourself paying up to 16% of the property’s value on top of the property itself. 

This can become a massive amount of money, so finding ways to avoid stamp duty can help. 

If you are investing in buy-to-let properties in the UK, learning how to avoid stamp duty on a second home can be a good way to lower costs when investing. 

Property investment can be a costly endeavor, so saving costs where you can is important. 

This post will give you information on how much stamp duty you will pay in different parts of the UK, and ways to avoid paying stamp duty on a second home.

How Much Stamp Duty Do I Have To Pay On A Second Home?

Stamp Duty tax rates vary depending on where in the UK your property is, as Scotland and Wales have their own stamp duty land tax brackets. 

First-time buyers can often receive discounts or incentives for stamp duty when buying their first property. 

If buying a second property, you will normally have to pay additional stamp duty. 

Here are some tables to explain how much stamp duty you would need to pay for a single property, as well as the higher rates of stamp duty you would pay for a second property:

England and Northern Ireland Stamp Duty

(per Gov.uk as of August 2022) In England and Northern Ireland, you pay stamp duty on increasing portions of the property.

England and Northern Ireland Stamp Duty

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Wales Stamp Duty Rates

(per gov.wales as of August 2022) In Wales, stamp duty is known as Land Transaction Tax, or LTT. Similar to England and Northern Ireland, you only pay stamp duty in Wales on portions of the property’s value over a certain amount. 

Despite working in the same way, the rates of LTT are different from England and Northern Ireland’s stamp duty, meaning you will pay different amounts of tax if you purchase a second property in Wales.

Wales Stamp Duty Rates

Scotland Stamp Duty Rates

(per gov.scot as of August 2022) Similar to Wales, Scotland replaced stamp duty with LTT in 2015. However, the rates are again different to other areas of the UK.

Scotland Stamp Duty Rates

These tables and charts can be confusing, so if you are looking for a way to calculate how much stamp duty you would pay on a property, try our stamp duty calculator.

How Can I Avoid Paying Stamp Duty On A Second Home?

As you can see from the tables above, in most cases you will need to pay stamp duty or its equivalent when purchasing a second property. However, there are stamp duty exemptions, but they are often very specific requirements. 

Usually, you cannot avoid paying stamp duty when buying property, but there are several ways of getting around it. HMRC has several stamp duty exemptions they abide by, but you may need to do more work to achieve these.

Purchase A Property Worth Less Than £40,000

If the property you are purchasing to be a second home is valued under £40,000, you do not need to pay stamp duty. This can limit the type of property you are purchasing and is likely more suited to buying land. 

The average price of land in the UK is between £8000-£10,000 per square acre. This means you would need to develop properties on the land, driving up additional costs and making it long before you can use your second home.

New property tends to have a higher value, but unless you are willing to wait and have more funds set aside outside of the purchase price, then this is not a cheap way of avoiding SDLT.

Purchase A Mobile Home

Mobile homes of any kind, such as a caravan or houseboat, do not require paying any stamp duty. If you are looking to use your second property as a holiday home, this can be a great way of avoiding stamp duty on a second home. 

If you are looking to use your second home as an investment, such as turning it into a buy-to-let property, this is not the best way to avoid stamp duty. It will be harder to find tenants for a mobile home than it will for other forms of housing.

Purchase A Second Property To Be Your Main Residence

If you are purchasing a second home to move in there permanently, you will still have to pay stamp duty when making the purchase. However, if you sell your first property and move into your second home full-time within three years, you can claim the money back as a stamp duty refund. 

You will need to sell your first property within three years to claim this stamp duty refund. If you are buying a second home to use as a holiday home, as a buy-to-let investment, or for other use, you will still have to pay stamp duty. 

If it takes longer than three years to sell your first property, you will need to write to HMRC explaining why it took longer than three years to sell.

 

In the event of a divorce, you can put a ‘property adjustment order’ in place, which transfers ownership of the property solely to your former spouse. A divorce lawyer can help with this. Once this is in place, you can purchase an additional property without paying stamp duty. 

If a ‘property adjustment order’ is not in place, you can claim a refund on your stamp duty after buying a new home the same way you would when buying a new home to be your main residence.

If you are looking to use your second home as an investment, such as turning it into a buy-to-let property, this is not the best way to avoid stamp duty. It will be harder to find tenants for a mobile home than it will for other forms of housing.

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Purchase A Second Home During A Stamp Duty Holiday

If the housing market is looking unstable or weak due to outside circumstances, the government can introduce a stamp duty holiday which is a kind of tax break. This means you do not need to pay stamp duty when purchasing a property. 

The last stamp duty holiday was in 2021 when Rishi Sunak introduced it as part of an effort to revitalize the economy in the wake of the COVID-19 pandemic. There is not likely to be another tax break shortly. This makes waiting for one a potentially long wait.

Purchase A Second Home For Someone Else

If you are looking to buy a residential property for your children or other family members, there are ways of avoiding paying stamp duty for a second home. 

Your name cannot be on the deeds of the property, otherwise, the government will class you as one unit. This includes buying a second home for your spouse or children, even if they do not own property themselves. 

By gifting the deposit to the person you want to buy the second home for, you avoid being named a co-owner of the home. 

Instead, sign the contract as a guarantor so you can pay for the property indirectly, or use a family offset mortgage to use your savings to pay the mortgage. This way you can avoid stamp duty on a second home for your loved ones. 

As you can see, there are multiple ways of avoiding stamp duty when buying a second home in the UK but they normally come under very specific circumstances that most property buyers will not fall under. 

If you would like to learn more about stamp duty, see our guide on how stamp duty affects buy-to-let properties

Alternatively, if you have any questions, our sales team is more than happy to help in any way we can. 

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