Buying a second home
Buying a second home is a truly exciting prospect and something that many hard working people dream of. From a charming rural holiday home to a stylish pied-à-terre in the city, second residences come in all shapes and sizes.
Not only can having a second home contribute greatly to your quality of life, as you have somewhere to escape to during a rainy English winter or a place for a pleasant stay during the summer holidays, but it can also make a positive contribution to your financial situation.
Buying a second home can be a very prudent way to make a property investment, as most people are more comfortable with the demands of sourcing a good residential property and managing it than they may be with investing in a different way.
A second home also provides you with the means to enjoy the investment you are making rather than simply putting money aside. However, there is nothing enjoyable on paying stamp duty on a second property. Read on for our guide to stamp duty as the owner of a second home.
How much stamp duty on a second home?
The first thing to find out when considering purchasing a second home is how much stamp duty you would be liable to pay on it. Unfortunately, this isn’t always easy to determine, as stamp duty rates are so varied that it is often difficult to identify exactly which band that you fit into when a second home is added to the picture.
As a general rule you will be liable to pay at least 3% stamp duty rates on a second home in addition to the standard stamp duty land tax (SDLT) rate. This is the case throughout England and Northern Ireland. Second home stamp duty rates fall into the following bands:
1. Up to £125,000. The standard SDLT rate is 0%. The SDLT rate for a second home is 3%.
2. £125,001 – £250,000. The standard SDLT rate is 2%. The SDLT rate for a second home is 5%.
3. £250,001 – £925,000. The standard SDLT rate is 5%. The SDLT rate for a second home is 8%.
4. £925,001 – £1,500,000. Standard SDLT rate is 10%. The SDLT rate for a second home is 13%.
5. £1,500,001 and above. The standard SDLT rate is 12%. The SDLT rate for a second home is 15%.
For example, if you were to purchase a property valued at £300,000 as an ordinary residence, you would owe £5,000 of stamp duty. However, if the same property was purchased as a second home, you would pay £14,000.
This is due to the fact that you are paying 8% stamp tax on the part of the property that falls into the third band – £50,000. You will pay another 5% stamp duty on the part of the property that falls within the second band – £125,000. You will then pay 3% stamp duty on the final £125,000 of your property. This is equivalent to £14,000. The rates discussed above represent stamp duty land tax between 2019 and 2020 and may change in the future.
To find out more about buying a second home, get in touch with Michael Anthony. Our expert team will be happy to help you.