What is the 3% stamp duty surcharge?
Buying property is an expensive business. One of the costs you need to budget for when buying a home is stamp duty, or Stamp Duty Land Tax (SDLT), to give its official name.
You have to pay the tax to HMRC if you buy a residential property or land worth more than £250,000 in England and Northern Ireland. The amount you pay depends on the property price.
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If you already own a home and you go on to buy an additional property, a 3% surcharge is loaded on top of these regular stamp duty rates. You can see these in the table below.
| Band | Regular residential SDLT rates | Residential rates with the extra 3% |
|---|---|---|
| £0 - £250K | 0% | 3% |
| £250K - £925K | 5% | 8% |
| £925K - £1.5m | 10% | 13% |
| £1.5m+ | 12% | 15% |
You tend to pay higher tax when you buy additional property or land in Scotland and Wales too. But the tax is different in these countries:
Scotland - Land and Buildings Transaction Tax
Wales - Land Transaction Tax.
This guide refers to stamp duty rules in England and Northern Ireland.
When do you have to pay stamp duty on a second home?
You normally have to pay the higher rates of stamp duty when you buy an additional home (or a share of one). This could be a holiday home or a buy-to-let property.
Here’s an example from HMRC of how the stamp duty on second homes works. You already own a house that you consider your main home (called a ‘main residence’).
You then buy a holiday home for £300,000. You now own two properties. So, the stamp duty you owe on your holiday home is calculated as:
3% on the first £250,000 = £7,500
8% on the final £50,000 = £4,000
Total stamp duty = £11,500
Homes abroad come under the scope too. So, if you own a villa in Spain and you buy a home in the UK? Yes, you may need to fork out the 3% stamp duty surcharge for that.
You can use online stamp duty calculators, such as ours or HMRC’s to work out how much you might need to pay.
When was the stamp duty on second homes introduced?
The 3% stamp duty surcharge was unveiled by the then-Chancellor, George Osborne, in the 2015 Autumn Statement. And it came into force on 1 April, 2016.
How to avoid stamp duty on a second home
The good news is there are some circumstances where you may not need to pay the higher rates of stamp duty. Let’s take a look at them.
1. You replace your main home
You won’t need to pay the 3% stamp duty surcharge if the property you buy replaces your main, existing home.
So, if you’re selling your main home and buying another, it’s important to get your ducks in a row.
You need to sell your existing home before (or on the same day as) you complete the purchase of your new home. Otherwise, you end up owning two (or more) properties. And that means paying a higher stamp duty rate on the new, additional property.
That said, you may be able to claim the 3% stamp duty surcharge back if you sell, or give away, your last main home within three years of buying your new home. There are more details on this further down.
2. You transfer ownership (or part ownership) of a residential property to your spouse
But bear in mind that to qualify, no one else can be involved in the transfer.
3. You buy a property (or a part of one) that is:
• worth less than £40,000, or
• a combination of residential and non-residential (such as a flat above a shop), or
• ‘moveable’, such as a caravan, houseboat or mobile home (unless it is now a permanent fixture).
The 3% stamp duty surcharge also doesn’t apply to residential property where the lease:
• has seven years or less left (on the date it was granted), or
• is owned by someone else and it has more than 21 years left.
4. You increase your share in a property, if all of the following apply:
• you already have a minimum 25% stake
• you have lived in the property as your only or main home for the last three years
• where you’re extending a lease, it has at least 21 years left.
Can you claim back stamp duty on a second home?
Yes, you can apply for a refund of the 3% stamp duty surcharge if you sell your previous main home within 36 months (three years) of buying your new one.
If it takes you longer than three years to sell your last home, you might still be able to claim a refund.
To qualify, you need to have bought your new home on or after 1 January, 2017. And you have to demonstrate that exceptional circumstances stopped you from selling your old home. This could be the result of government-imposed restrictions, for example.
How does the stamp duty refund work?
Claiming a refund on the 3% stamp duty surcharge can be a straightforward process.
You can apply for one using HMRC's online form or filling in the form on-screen, printing it off and sending it to HMRC. You need to have a Government Gateway user ID and password to use the online form.
Don't leave it too long to apply for a refund. If you offloaded your previous property on or after 29 October, 2018, you must claim a refund within 12 months of either:
• the date of the sale, or
• the filing date of the stamp duty return relating to your new home (whichever is later).
The rules are different for properties sold on or before 28 October, 2018.
How can I reduce the stamp duty on a second home?
If you can’t avoid stamp duty, you may be able to cut the amount you owe through a relief.
Before 1 June, 2024, if you snapped up six or more homes, you could pick between paying either non-residential rates of stamp duty, or higher rates using multiple dwellings relief.
But this has now changed. If you buy six or more properties on or after 1 June, 2024, you must pay the non-residential rates of stamp duty.
Non-residential stamp duty rates
| Property price | Rate | Stamp duty to pay |
|---|---|---|
| £0 - £150,000 | 0% | £0 |
| £150,000 - £250,000 | 2% | £3,000 - £5,000 |
| £250,000+ | 5% | £5,000+ |
You can see a comprehensive list of all stamp duty reliefs on the HRMC website.
Does stamp duty on a second home apply if my partner owns another property?
Unfortunately, the higher rates of stamp duty apply to the buyer and people they're married to or buying with.
HMRC states that if you’re married or in a civil partnership, the tax rules apply to you both as if you were purchasing a home together. In other words, the rules treat you as if you’re buying jointly - even if that's not the case.
Let’s say you buy a home and your spouse already owns a property. The 3% stamp duty surcharge is likely to apply (unless you’re permanently separated).
Another common scenario is if you buy a property with someone else, such as a friend or relative. HMRC says the tax rules apply to each person (and their spouse) who is buying the property. So, if any of you already own a home, you may have to pay the higher rates of stamp duty when you buy a property together.
Can I buy a house in my child's name to avoid stamp duty?
If you already own a home and your name is on the title deeds of an additional property intended for your child, you would typically need to pay the 3% stamp duty surcharge.
You could consider other options, such as giving your child a deposit to buy a home or acting as a guarantor for their mortgage.
If your child's name is on the title deeds, and they don't already own a home, then the higher stamp duty rates are unlikely to apply. It's worth noting that your child would own the property so this scenario requires careful consideration.