For home purchases + second homes
Over the last few years, the rules and regulations surrounding Stamp Duty Land Tax (SDLT) have changed several times. Here we summarise the latest position as a reminder and reference source whether you are buying your own home, or a second home.
SDLT positive changes for most
In December 2014, the government reformed Stamp Duty, making it a tiered system, rather than the so-called “slab” system of previous years.
The HM Treasury report this saved 780,000 homebuyers over £657million in 2015. In turn, 98% of homeowners were reported to have received a reduction in the cost of their home purchase.
SDLT on your own home purchase
The new tiered system allows for SDLT to be applied proportionally to the value of the property that falls within each tier. This is rather than a single rate on the entire property price.
Only homes that cost over £937,000 would have seen their SDLT increase, which is why only 2% of the population have experienced a rise!
Here are the current rates of SDLT:
£0-£125,000 | 0% |
£125,001-£250,000 | 2% |
£250,001-£925,000 | 5% |
£925,001-£1.5 million | 10% |
Over £1.5 million | 12% |
For example, a property worth £280,000 would pay 0% SDLT on £125,000 then 2% on £125,000 (up to the £250,000 threshold) and finally 30,000 at 5%. This equals £4,000.
SDLT on a second property
The above rates apply if the property you are buying is your only home and it is your Principal Private Residence, i.e. the only property you own, and the one you live in.
From April 2016, the government introduced a 3% SDLT surcharge on second homes, which is applied on top of the regular percentages.
Therefore, if you choose to buy a second home, either for holidays or as an investment, then different rules now apply. The surcharge applies even if your main residential property is abroad and you decide to purchase in the UK.
This incentive was to deter people from “collecting houses” which was believed to be fuelling an imbalance in the property market.
Here are the current rates of SDLT for second homes:
£0-£125,000 | 3% |
£125,001-£250,000 | 5% |
£250,001-£925,000 | 8% |
£925,001-£1.5 million | 13% |
Over £1.5 million | 15% |
Are there exceptions?
The surcharge will also be applied if you buy a new home before selling your current one, simply due to timing errors. Although there is a refund policy here if you do sell within a set time period.
Also worth noting, if you are buying a house for your children, and already own a property in your name, then the surcharge will be applied as this is deemed a second home.
An exception may be granted if you are going through a divorce proceeding, and are in the process of buying.
Other than that the 3% surcharge will be applied unless your purchase transaction is valued at under £40,000 or the property is a mix of residential and commercial, for example an apartment above a retail outlet.
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