Thinking Of Buying A Second Home? What Is SDLT?
26th January 2018
You want to know about SDLT (Stamp Duty Land Tax) when buying your second home.
You're looking at buying a second home and you've landed here. The reason you've landed here is perhaps you're doing your due diligence and finding out everything you need to know before making that second purchase or perhaps you've made the purchase and just want to clear a few things up.
For those buying a second home, Stamp Duty, the tax levied from buyers when they purchase a home or land. It's pretty common knowledge now, especially after the deafening cheers of first-time buyers looking to purchase their first home but since the November 2017 Autumn Budget, stamp duty on first-time homes up to the value of £300'000 has been abolished. Of course, this comes with its own caveats including the recent article from The Guardian which tells us the OBR has warned that the abolition of stamp duty for first-time buyers may increase house prices. So, if you're looking at purchasing your first home, you may be better suited to visit this article by clicking here.
Stamp Duty: What You Need To Know
In April 2016, there was a 3% surcharge added on to the SDLT already paid on second homes. So, remembering we don't pay any stamp duty on first-homes under £125'000, one question we're asked is;
"How will the surcharge affect me if I'm purchasing a house for less than £125'000?"
The short answer is: You'll pay 3% in SDLT. You don't pay any stamp duty on properties valued at less than £40'000 regardless of whether they're your first, second or one-hundredth home but if the value exceeds £40'000, this will incur an SDLT charge of 3%, on a property purchased for £125'000 (£3'750).
Stamp Duty is calculated in bands so, under the banding system, second homes worth less than £125,000 but more than £40'000 now attract 3% tax instead of no tax at all. Those worth between £125,000 and £250,000 now have a 5% charge rather than the previous 2%, and so on. At the top end of the banding system, second homes purchased for more than £1.5million are subject to 15% whereas, previously, it was 12%.
You can calculate your SDLT using the Government's Stamp Duty Land Tax Calculator which can be found by clicking here. Alternatively, you can calculate it yourself if you know your way around a calculator by looking at the table below:
|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%|
What if you're buying a third property?
When you hear about stamp duty or SDLT on second homes, you can be safe in the knowledge that this refers to any home which isn't your main residence, so it could be your hundredth home and it'd be considered your second home for all intents and purposes, as far as SDLT goes, anyway.
According to OnTheMarket.com, "couples who have separated, but not yet divorced, and own two properties between them, will not be treated as second homeowners. But couples living together, whether married or not, will be treated as one unit. They will not be able to buy a second home and escape the surcharge by putting one property in one partner’s name and one in the other’s." In other words, if you've separated but are still married, the second home purchase becomes the main home of the person who has moved out of the main home. However, in the case of people living together as a couple but aren't married, when purchasing a second home between them, they'll be considered a single-unit as if they were married.
Do I need to pay stamp duty on my houseboat?
No, neither do you have to pay SDLT for a motorhome, caravan or other mobile home types regardless of whether their value is above £40'000. You may be subject to capital gains tax on some sales though so make sure you do your due diligence and seek advice from a qualified tax advisor.
So, now you're in good stead when it comes to understanding your SDLT obligations when buying a second (or third, and so on) home. However, if you'd like to find out more information, including information about any Stamp Duty Relief you may be entitled to, visit the Money Advice Service's Stamp Duty Guide by clicking here.