How Can You Avoid Stamp Duty on a Second Home?

Estimated reading time 5 minutes

The stamp duty holiday is well and truly over. The government assistance programme, launched as part of a response to the economic problems caused by COVID-19, ran from July 2020 until June 2021. Now, with it no longer an option, some people are looking at the additional costs of a second home and wanting to know where they stand.

Typically, the stamp duty on a second home is higher than on a main residence but there are a few ways to avoid paying it.

How much is stamp duty on a second home?

It may be that you aren’t able to avoid stamp duty on a second home. The circumstance around your need for the property meaning that you wouldn’t be able to make yourself exempt. A second home brings a 3% increase on standard stamp duty rates.

At the time of writing the rates are:

Property value Stamp Duty 1st home Stamp Duty 2nd home
Up to £250,000 0% 3%
£250,001-£925,000 5% 8%
£925,001-£1,500,000 10% 13%
From £1,500,001 12% 15%

How is stamp duty on a second home calculated?

Looking at the table above, you can see the value of stamp duty that you will pay. However, let’s give you an example of how it works for your new home. Your second house is worth, let’s say, £700,000. Looking at the table you will pay 8%. That 8% though, is only charged on the value above £250,000. Meaning, you pay 3% on the first £250,000 of the house and 8% on the remaining £450,000.

How can I avoid the stamp duty on a second home?

A couple of things can help you avoid this additional cost, they are quite limited, however.

  • Your second home costs less than £40,000, or the share you buy is under £40,000
  • You buy a caravan, mobile home, or house boat

Additionally to this, you can avoid the higher rate of stamp duty by making this second home your main residence. To do this, you would have to sell your original primary property. If you plan to still own them both, you will pay the stamp duty on the new residence.

If you bought the second home before selling the primary residence you will still own two homes and be liable for the charge. If though, you sell the primary property within three years of buying the second house, you may be entitled to a refund on the surcharge.

Sell to a cash house buyer

You may have found a second home that is just perfect but are concerned about the value of stamp duty.  With the potential to get a refund on any surcharge, some people consider selling their primary property to cash house buyers as the process of selling is so much quicker. Due to the ultra-fast speed with which cash house buyers operate, it means you can apply for the refund much sooner and begin investing in your new property.

Can I avoid second home stamp duty if house is in my partners name?

Whether the house is bought in your partners name or bought with both of you on the mortgage the second rate would still apply. This is because HMRC view married couples as a singular unit and not two individuals.

If we divorce, do I pay second home stamp duty on my new home?

This all depends. You shouldn’t have to pay the additional rate, but you will if you don’t get a property adjustment order in place. Without one, you may still appear on the deeds to the original property and find yourself paying the higher rate on the new property you move into.

If you do not get a property adjustment order, you may still be entitled to the refund on your second home stamp duty, This would apply if the marital home is sold within three years.

Reclaiming stamp duty on second home

It is possible to get money back via a second home stamp duty refund. As we mentioned earlier, this can only apply if you make your second home, your primary home and sell the original home within three years. There are some exceptions though and if you can prove them, you will be able to claim.

If you purchased your new home after Jan 1st 2017 and were unable to sell your previous home within three years, a refund may be available. Reasons could include:

  • Covid-19 impacting the sale
  • An action by a public authority that prevented any sale

Once any of the two above reasons have ended, you must sell the home to be able to apply for the refund. You would then contact HMRC stating, in as much detail as possible, the explanation as to why you could not sell the house within three years. Additional information would then be required, all of which is listed on the HMRC website.

Taxes are inevitable but some can cost you less than thought if you know all the rules behind them. To help you avoid the hidden surprise of a higher rate of stamp duty, consider speaking to the experts are Gaffsy. We can buy your primary property quickly without you having to worry about legal fees, long waits for completion or chains. Contact us today to see how we can save you money.

Get A Cash Offer For Your Property

Get a Free Cash Offer today
© 2024 Gaffsy Ltd. Registered in England no 12403344
Google Rating
Based on 25 reviews