The higher rates of stamp duty for additional dwellings purchased by individuals and for first and subsequent dwellings purchased by non-natural persons have applied since 1 April 2016. They are levied on any acquisition that is referred to in the legislation as a ‘higher rates transaction’, which is broadly as follows:
- The purchase of additional dwellings in England, Wales and Northern Ireland by individuals were, at the end of the day of purchase, sole or joint individual purchasers own two or more dwellings and are not replacing their main residence. The charge does not, however, apply where, at the end of the day of purchase, a sole individual purchaser owns an interest in only one dwelling or joint individual purchasers together own an interest in only one dwelling and
- the first and subsequent purchases of dwellings by persons who are not individuals except where the 15% (or 17% for non-UK residents) rate under Sch 4A already applies
Do You Pay Stamp Duty on Second Homes?
Second and additional residential properties in England and Northern Ireland normally carry a 3% surcharge on top of the standard rate of Stamp Duty.
What is the definition of a main residence or primary residence for SDLT?
There is no statutory definition of a main residence for SDLT and it is a matter of fact and circumstance. HMRC states at SDLTM09812 that “Where an individual resides at more than one dwelling, all the facts and circumstances of the particular case must be considered to conclude which residence is the main residence. The rules do not allow an individual to nominate which dwelling is their main residence.”
What is the definition of main/primary residence for capital gains tax purposes?
There is no statutory definition of main or primary residence for CGT purposes but HMRC in their published guidance at CG64545 are likely to use the following list of points in establishing whether a property is a residence and then whether it is the main residence:
- For each dwelling-house, what is the timeline of events from the date of acquisition until the date of disposal? When was the dwelling-house first used and last used as a residence? It may be necessary to look at periods before the first use or after the last use e.g. where the individual was living at someone else’s property.
- If the individual is married or in a civil partnership, where did the family spend its time? Spouses or civil partners who are living together can only have one main residence between them.
- Are there any dwelling-houses owned solely by the spouse or civil partner that also need to be considered?
- Is the size and location of the dwelling-house suitable for it to be the main home of the family according to their size and lifestyle?
- How many rooms are there?
- How was it furnished?
- If the individual has children, where did they go to school?
- Where was the individual’s place of work? Where was their spouse or civil partner’s place of work?
- Where was the individual registered with a doctor/dentist?
- At which residence was the individual and their spouse, or civil partner, registered to vote?
- Which address was used for correspondence for: Banks & Building Societies, Credit cards, Utility bills, HMRC and other Government departments
- At which address was the individual’s car registered and insured?
- Which address was the main residence for council tax? Were there any council tax exemptions in place, such as for the dwelling-house being uninhabitable or a second residence?
- Does the utility bill usage suggest that it was occupied as the main residence of the individual and their family?
How Much is Stamp Duty on Second Homes?
The charge is 3% above the normal SDLT residential rates and is charged on the slices of the price of the property that fall into each band. The current stamp duty on second home rates is set out in an alternative ‘Table A: Residential’ that is substituted for the normal Table A for when there is a higher rates transaction, and the following table shows the rates for UK residents in the alternative Table A effective from 1 October 2021:
| Minimum property purchase price | Maximum property purchase price | Basic residential SDLT Rate | Additional SDLT Rate |
|---|---|---|---|
| £0 | £125,000 | 0% | 3% |
| £125,00 | £250,000 | 2% | 5% |
| £250,000 | £925,000 | 5% | 8% |
| £925,000 | £1,500,000 | 10% | 13% |
| £1,500,000+ | 12% | 15% |
You can calculate how much SDLT you owe on a second home using an online calculator.
Are There Exemptions to Paying Stamp Duty on Second Homes?
There are several exemptions to the 3% rate of SDLT on additional homes. The following types of residential purchases are exempt from the higher rates of SDLT:
- An additional home costing less than £40,000
- Another home bought during a divorce or separation
- A mixed-use property (ie part of, or above a commercial property)
- A second or additional home to be used as your main residence (in which case, you have to prove that
- you have sold your previous main residence).
- A property bought from an employee by an employer.
- The property is uninhabitable at the time of purchase
Social landlords and charities are exempt from the 3% higher rates on additional residential homes.
Does The Stamp Duty Holiday Apply to Second Homes?
The Covid-19 SDLT Holiday does apply to second homes. The current rates – and when they return to the standard thresholds
What happens if you don’t declare stamp duty on your second home?
Not declaring a second home SDLT when it is payable is likely to be detected by HMRC using the intelligence-gathering resources available to HMRC and then to an assessment for the additional SDLT payable plus interest and a penalty.
Can I claim an SDLT Refund for a second home?
Yes – you have 12 months after the disposal of your old main residence or, if later, 12 months from the filing date of the return for the new main residence in which to claim a refund. You can read more about stamp duty refunds here
What is the stamp duty refund process on a second home?
Under the stamp duty refund process, you must claim your refund within 12 months of the letter of the following:
- sale of the previous main residence
- the filing date for the SDLT return relating to the new residence (this covers situations where you sell your old main residence less than 14 days after you buy your new one).
If your circumstances were exceptional, you might still be able to apply for a refund if you could not sell your previous home within three years of buying your new one. Exceptional circumstances can include government-imposed restrictions preventing the sale or action taken by a public authority preventing your sale. Under the stamp duty refund process, HMRC is very mean about accepting that there were exceptional circumstances and for example, are unlikely to accept that a divorce or catching Covid are valid reasons. Also, if you held on to your old main residence and let it out for, say, two years to earn rent and/or waited for the property’s value to increase before trying to sell it in year 3. If you do not manage to sell within the three years allowed, HMRC will be unsympathetic to any exceptional circumstances claim. To be able to apply for a refund in such circumstances, you must have sold the old home as soon as the circumstances allowed.
If you would like to understand the stamp duty refund process, this guide on the stamp duty refund process will help you.
What tax do you pay when you sell your main/primary residence?
When a capital gain arises to an individual on their disposal of a home which has been their only or main residence then the whole or a part of that gain will be exempt from CGT, depending upon how long during their ownership the home was their only or main residence. The exemption is not limited to homes situated in the UK.
How Can Patrick Cannon Help?
Patrick Cannon is an expert in Stamp Duty Land Tax and Stamp Duty. Having worked for over 35 years in the field as a solicitor and barrister, he is widely recognised as an SDLT Specialist.
Buying a second or additional home usually carries a 3% surcharge on top of the standard rate of SDLT.
However, there are a number of exceptions and reliefs which could save you money. Patrick Cannon can guide you through the options, ensuring that you or your business complies with HMRC regulations.
If you have attempted to reduce the SDLT rates on an additional home, you may be facing an investigation or HMRC litigation for SDLT avoidance. Patrick Cannon offers his longstanding expertise to manage your correspondence with HMRC, defend you in a tax tribunal or bring about a case against an SDLT avoidance scheme provider.
To find out more about stamp duty on second homes, or to arrange a consultation – in person or via video call – contact Patrick Cannon here.
Other SDLT Areas Patrick Can Advise On:
- SDLT Avoidance Schemes
- SDLT Planning
- Reclaiming Stamp Duty
- Multiple Dwellings Relief for SDLT
- SDLT Anti Avoidance Rule
- Stamp Duty Appeals
- Mixed Used Claims
- SDLT on Divorce and Separation
- SDLT for Non-UK Residents
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For professional and insurance reasons Patrick is unable to offer any advice until he has been formally instructed.
