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How to avoid stamp duty for second property

If you’re looking to buy a house or residential property in England, you must know what stamp duty is and how it works. Know about it in detail here.

What is Stamp Duty?

Stamp duty is a tax you have to pay when buying a residential estate or a land property in England or Northern Ireland for a determined value. The same thing applies if you are buying a second home and if you own a shared property. 

The stamp duty applies to both freeholders and leaseholders of the property. While if you are purchasing a house or property in Scotland, you have to pay Land and Buildings Transaction Tax (LBTT) and Wales Land Transaction Tax (LTT) rather than Stamp Duty. If you are buying additional properties, you will have to pay an additional 3% in the Stamp Duty, on the tip of the updated charges for each band.

How much is Stamp Duty?

Stamp duty has various price bands. The Stamp duty cost has been calculated on the portion of the property buying price dropping within every band. For example, if you are a first-time buyer, the stamp duty cost differs from that of a second-time buyer.

 

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How much is the stamp duty for a first-time buyer?

It can be perplexing to know how much stamp duty a first-time buyer has to pay as it varies in each country. Know about it here in detail: 

In England and Northern Ireland

Hence, there is no stamp duty charged to the first-time buyers on the first £300,000 of a foremost residential property. (the property you’re buying must cost £500,000 or less).

In Wales

While, in Wales, first-time buyers have to pay no property purchase charge on the first £180,000 of a home.

In Scotland

Whereas In Scotland, first-time buyers, property transaction tax charges relapsed to their pre-coronavirus outsets in April. That means that first-time buyers pay no stamp duty tax on the first £175,000 of a property. 

When do you pay stamp duty?

You have to pay stamp duty within 14 days, if you don’t pay the stamp duty tax in 14 days you might get charged a fine or interest. 

How much is stamp duty for second homes?

In England and Northern Ireland, from April 2016, the additional stamp duty came into existence. If you’re purchasing a second home or other property, then you’ll have to give an extra 3% in the stamp duty charges. These additional charges are applied to the properties purchased for £40,000 or more. 

  • 3% stamp duty for second homes up to £500,000
  • 8% on the upcoming property purchase of £425,000
  • 13% on the upcoming property purchase of £575,000 
  • 15% for higher purchases of £1.5m

You may have to pay the higher rate of stamp duty if you still own the preceding house which you have not sold and has no lease on it with more than 21 years left to reach.

How to avoid stamp duty on a second home?

You can avoid 3% stamp duty tax charges on a second home while:

  • The estate’s cost is less than £40,000
  • If the home or property is moveable, such as a houseboat or mobile home.
  • A property with seven years remaining on the lease.
  • If you acquire 50% or less than 50% ownership of a property.

I’m getting divorced and buying a home. Do I have to pay the second home rate?

There are specific rules and regulations for this.  

If one of the partners leaves out of the marital house and a ‘property adjustment order’ exists in the situation to deliver the home over to Partner B, then the additional stamp duty charge does not apply.

If you haven’t arranged a ‘property adjustment order’ – your separation lawyer will help you with this – then you do have to give the extra stamp duty charges. Although, you can ask for a reimbursement if you sell your share in the marital house in three years of when you walked out.  

Does the additional rate apply to leasehold extensions?

Following the latest laws, if you want to extend a lease on a home that is not your estate entirely and the admitted premium is £40,000 or over, then the 3% stamp duty additional rate may apply. If the premium is over £40,000 then an additional rate applies to leasehold extensions without considering how many houses are owned.

Notwithstanding the jargon used, a lease extension or difference serves as a submission of the current lease and the grant of a fresh lease. Generally, Stamp Duty Land Tax (SDLT) chargeable on the submission and regrant of a new lease (granted the charges does not drop inside the zero rate band) and is calculated by reference to the rent payable under the lease and any additional financial concern provided.

For further questions related to Lease extensions and property, contact one of our experienced chartered surveyors at Leasehold Valuations.

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