For many people considering buying a second property, the thought of paying extra stamp duty can be off-putting. Whether you’re considering a holiday home or a buy-to-let property, understanding the rules around stamp duty on second homes is essential, especially with the recent rate increases. In most cases, stamp duty is simply unavoidable. But in some scenarios, you may be able to reduce the burden or even claim a stamp duty refund.
While most second home purchases incur additional stamp duty, exceptions include inherited properties without a mortgage, properties under £40,000, and certain moveable assets like caravans or boats. Refunds may also apply if you sell your main residence within three years.
In this guide, we’ll explain stamp duty rates on second homes, the circumstances in which you might avoid paying them, and tips for making informed decisions about your second property purchase.
These rules apply primarily in England and Northern Ireland, with residential property purchases in Scotland and Wales subject to different regulations, such as the buildings transaction tax and land transaction tax, respectively.
What are the new rules on second homes?
The government introduced stamp duty charges for second homes in April 2016. The goal of this was to curb the purchase of holiday homes and buy-to-let properties in order to manage housing demand. At that time, the additional stamp duty rate was set at 3% on top of standard home stamp duty thresholds.
From October 2024, the additional rate increased to 5% to include property abroad if you already own a primary residence.
How much stamp duty land tax do I pay on a second home?
Standard stamp duty rates are as follows:
Stamp duty rates on a single property up to 31 March 2025
| Property or lease premium or transfer value | SDLT rate |
|---|---|
| Up to £250,000 | Zero |
| The next £675,000 (the portion from £250,001 to £925,000) | 5% |
| The next £575,000 (the portion from £925,001 to £1.5 million) | 10% |
| The remaining amount (the portion above £1.5 million) | 12% |
Stamp duty rates on a single property from 1 April 2025
| Property or lease premium or transfer value | SDLT rate |
| Up to £125,000 | Zero |
| The next £125,000 (the portion from £125,001 to £250,000) | 2% |
| The next £675,000 (the portion from £250,001 to £925,000) | 5% |
| The next £575,000 (the portion from £925,001 to £1.5 million) | 10% |
| The remaining amount (the portion above £1.5 million) | 12% |
For second properties, the additional stamp duty rate of 5% is added on top of these rates, significantly increasing the cost of a second home purchase.
Do I have to pay stamp duty even if it is a holiday home?
Yes, stamp duty on second homes applies regardless of whether it is a holiday home or not. The higher rate applies to all additional property purchases.
Is there a stamp duty loophole?
While stamp duty exemption is rare, there are circumstances where it’s possible:
- Inherited property: Generally speaking, stamp duty is not due on inherited property without a mortgage. This is because stamp duty applies to transactions, not possessions. If your inherited property has a mortgage, consult a qualified solicitor or accountant to determine your liability.
- Stamp duty holiday: In the past, the government has introduced temporary stamp duty holidays to boost the housing market. While there is no current exemption, it’s worth keeping up with policy changes.
How to avoid or reduce stamp duty on second homes
1. Buy a second property under £40,000
No additional stamp duty is due on second properties costing less than £40,000.
2. Buy a caravan or boat as a second property
A caravan, boat, or mobile home is usually classified as a “moveable” asset, meaning you can avoid paying stamp duty. To qualify for a stamp duty exemption, the property must not be permanently fixed to land, and you should be able to move it without modifications.
3. Build your own home
If you’re building your own home, the amount of stamp duty land tax you’ll pay depends on things like whether you already own the land or if you’re demolishing an existing property. Check with HMRC to make sure you understand the rules and avoid any surprise costs.
4. Claim stamp duty back
You can claim back the 5% stamp duty surcharge on a second home if you sell your original primary residence within 36 months of buying the second property. The refund must be applied for within 12 months of selling your old home or filing the stamp duty return.
5. Invest in community property
If you’re a property developer, you might be able to get stamp duty relief in certain situations—for example, if your project includes building affordable housing, schools, parks, or other amenities that benefit the local community.
To find out if your project qualifies and how to claim the relief, it’s a good idea to speak with a tax expert or legal advisor.
How about first-time buyers?
As a first-time buyer, you don’t have to pay any stamp duty up to a purchase price of £250,000. However, if you purchase a second property in the future, you’ll no longer be classified as a first-time buyer, and the additional 5% rate of stamp duty on second homes will apply.
What if I buy a second property through a limited company?
Buying a second property through a limited company or Special Purpose Vehicle (SPV) does not exempt you from paying the additional rate of stamp duty.
However, you may also be eligible for other tax benefits. For example, you can offset mortgage interest payments and claim allowable expenses against rental income.
Also, limited companies pay corporation tax at 25%, which is lower than the additional rate of income tax at 45%. So, buying through a company rather than as an individual could be a more tax-efficient option for portfolio landlords and long-term investors. It is essential to seek advice from a tax professional to understand the implications fully.
Can I claim stamp duty back if I sell my second home?
Refund eligibility depends on whether the second property became your main residence. If it was primarily a holiday home or buy-to-let property, you are unlikely to qualify for a stamp duty refund. Consult an accountant to explore any potential relief options.
Looking to purchase your next property? Get in touch
At Goldmanread, we have years of expertise in helping landlords, investors, and second-home owners get a mortgage. Whether you’re buying a holiday home or a seasoned investor building your portfolio, we can help you find the most appropriate and competitive mortgage for your needs.
Contact us today to discover how our mortgage brokers can help you make your next property purchase with confidence.
Frequently asked questions about second homes and stamp duty
How do HMRC know you have a second home?
It’s illegal to evade paying stamp duty on second homes where second home stamp duty is owed.
HMRC have various ways of identifying ownership of second homes, such as Land Registry records and third-party notices from estate agents, solicitors, and banks.
What is the 3-year rule for stamp duty?
The 3-year rule for stamp duty means that if you sell your main home within three years of buying a second property, you can apply for a refund of the extra 5% stamp duty surcharge you paid.
This rule is in place to help people who need to buy a new home before selling their old one. To get the refund, you’ll need to make sure the sale is completed within the three-year window and apply through HMRC. Exclusions apply, so check HMRC’s current regulations.
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