Thinking of buying a second home?

This month, property expert David Leake of Housesetc shares his handy guide to stamp duty changes and some points
to consider when buying a second home. To buy-to-let or not to buy-to-let? That is the question.

Since April 2016 – as many homeowners will be aware – a stamp duty surcharge of 3% has been levied on second homes with obvious implications for the buy-to-let sector.

If you are contemplating a second home, whether for your own use or as a buy-to-let investment, here are the 5 key points to bear in mind:

1. Stamp duty land tax (SDLT) is a tax paid by homebuyers when they purchase property or land. The tax is banded so that no tax is levied on properties worth less than £125,000, but £7,500 on a property worth £350,000.

2. Second homes are now subject to a 3% stamp duty surcharge. Under the banding system, second homes worth less than £125,000 now attract
3% stamp duty. Those worth between £125,000 and £250,000 now have a 5% rate rather than the standard 2%. At the top end of the scale, second homes worth in excess of £1.5million attract 15% stamp duty rather than the standard 12%.

3. Second homes are homes other than a main residence whether they are let or not. It does not matter if a main residence is overseas because a second home in the UK will still be subject to the stamp duty surcharge.

4. Stamp duty is not payable on caravans, mobile homes or houseboats.

5. It is sometimes possible to reduce stamp duty liabilities by designating a property, whether the main home or a second home, ‘mixed-use’, i.e. used for both residential and commercial purposes, such as running a small business. But this can also expose the homeowner to higher business rates and higher rates of capital gains tax.