Stamp Duty on Second Property Explained

Landlords Property Market

Posted in Nov 17 , 2025

If you are planning to buy a second home or invest in property in the UK, there are several costs that buyers often overlook. The most important of these is the stamp duty on a second property, which is a central talking point among landlords, investors, and those looking to purchase holiday homes. The HMRC rules update, rising prices, and the latest SDLT bands have made it necessary to understand what is owed before any commitments.

This guide will help landlords break down everything, including current rates, refund rules, and how they affect returns on investment.

What Counts as a Second Property for Stamp Duty?

As per HMRC, you will need to pay higher stamp duty land tax (SDLT) when you already own another home anywhere in the world and you’re buying an additional residential property, which may include:

Buy-to-let property
A holiday home
A second home purchased whilst keeping your primary residence
Investment flats bought for rental income
A property purchased jointly if one buyer already owns a home

The surcharge applies to any second home costing £40,000 or more, and below this threshold, SDLT does not apply.

Updated Stamp Duty Rates for Second Homes (2025–2026)

Second homes are subject to a 3% surcharge on top of the standard SDLT rates, officially called the Higher Rates for Additional Dwellings. Let’s see how it works:

The standard stamp duty rate applies first.
A 3% additional dwelling surcharge is added to each band.

How Stamp Duty on Second Property Is Calculated (Examples)

Let’s understand it with simple terms:

Example 1: Buying a £300,000 Investment Flat

Standard SDLT on a £300,000 home applies first.
Then an extra 3% is added across the band.
Total stamp duty may fall around £11,500–£14,000+, depending on the exact bands.

Example 2: Buying a £550,000 Second Home

Standard rates apply across multiple bands.
Add 3% surcharge.
Final SDLT could exceed £28,000+.

The total tax depends on property price bands, not a single rate.

Can You Avoid or Reduce Stamp Duty on a Second Property?

There are a few situations where stamp duty on a second property can be reduced or avoided completely, though these are limited and strictly regulated:

Buying a property under £40,000
Buying non-residential or mixed-use property (farmland, shops with flats)
Replacing your primary residence and selling your original home within the HMRC window
Certain inherited properties (depending on ownership share)

Stamp Duty Refunds When You Sell Your Main Home

Many buyers do not realise they may be due a refund. If you buy a new home whilst still owning your previous one, HMRC classifies the new one as a second property, meaning you must pay the higher rate. However, if you sell your original main residence within 36 months, you can claim a refund of the surcharge.

Things to consider:

Refunds must be claimed within 12 months of selling the original home, or within 12 months of filing your SDLT return, whichever comes later.
Refunds apply only if the new property becomes your main residence.

How Higher Stamp Duty Affects Landlords and Investors

The extra 3% can make the initial cost of a buy-to-let more expensive, which affects:

Return on investment (ROI)
Cash flow planning
Long-term rental yield calculations
Portfolio expansion decisions

However, rental demand in the UK remains strong, especially in cities like London, Manchester, Birmingham, and university towns. Many landlords continue to invest because strong rents can offset the higher purchase costs over time.

Common Mistakes in Stamp Duty on Second Homes

Many buyers face unexpected issues because of misunderstandings about SDLT and lose thousands. Common mistakes include:

Assuming joint purchases split ownership for SDLT (they do not)
Not budgeting for the surcharge
Buying through a company, thinking it reduces tax (it does not, companies still pay a surcharge)
Failing to claim a refund within the HMRC time limits
Misunderstanding inherited property rules

How Cribs Estates Helps Buyers and Landlords

Cribs Estates specialises in:

Understanding all costs involved, including SDLT
Comparing high-yield investment areas
Finding properties that maximise rental income
Managing legal compliance and purchase requirements
Building long-term property portfolios with proper tax planning

Whether you are buying your first investment flat or expanding your property portfolio, we make the entire process simple, transparent, and stress-free.

FAQs about Stamp Duty on Second Property

1. Do overseas buyers pay extra stamp duty on second properties?

Yes. Overseas buyers pay the 3% second-home surcharge, plus an additional 2% non-resident SDLT surcharge.

2. Is stamp duty different if I buy a second property with someone else?

If any person in the purchase already owns a home, the surcharge applies to the whole transaction, even if the other person is a first-time buyer.

3. Does inherited property count as owning a home for SDLT?

Yes, if you inherit more than a 50% share, it counts as an owned property under HMRC rules.

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