What the stamp duty surcharge on additional homes is and who pays it
How the higher rates of stamp duty work in England and Northern Ireland, who gets caught by them and when buyers can claim money back.
Buying a second home, a buy-to-let flat or a property through a company usually means paying more Stamp Duty Land Tax than a typical homebuyer. HMRC calls these the higher rates for additional dwellings. Most people call it the stamp duty surcharge.
The rules below apply to England and Northern Ireland. Scotland has Land and Buildings Transaction Tax with its own Additional Dwelling Supplement, and Wales has Land Transaction Tax with its own higher residential rates. The principles are similar, but the details and rates differ.
How the surcharge works
The surcharge is an extra percentage added to each band of standard stamp duty. It applies across the whole purchase price, not just the part above a threshold, so even fairly cheap properties can produce a meaningful bill. The current rates are published on GOV.UK, and HMRC's online calculator will work out the figure for a specific purchase.
Broadly, the higher rates apply when, at the end of the day you complete, you own two or more residential properties and you have not replaced your main residence. A few points catch people out:
- Property anywhere in the world counts towards what you already own, including a share in an inherited home.
- Married couples and civil partners are treated as one unit, so if your spouse owns a flat, you are treated as owning it too.
- A property worth less than £40,000 is not counted.
- Companies buying residential property generally pay the higher rates, even on their first purchase.
Replacing your main home
People moving house are not meant to be caught, provided the purchase replaces their main residence. If you sell your old home on the same day or before you buy the new one, the standard rates apply.
The difficulty comes when the timing slips. If you buy your new main home before selling the old one, you will pay the higher rates at completion. You can then claim a refund of the surcharge if you sell your previous main residence within three years. The claim is made to HMRC and has its own time limit, so it is worth putting a reminder in the diary on the day the old home sells.
Other situations to check
Buying with someone who already owns a property can trigger the surcharge for the whole purchase, even if you have never owned a home yourself. This regularly affects couples where one partner kept a flat from before the relationship, and parents helping children by going on the deeds.
Buyers who are not UK resident for stamp duty purposes face a separate surcharge, which applies on top of any higher rates. Residence for this test is based on days spent in the UK, not citizenship.
Paying and filing
Stamp duty is normally paid by your conveyancer, who files the return for you. The return and payment are due within 14 days of completion. If you are unsure whether the surcharge applies, raise it with your solicitor before exchange rather than after, because the answer will change how much cash you need on the day.
Claims, amendments and refunds can be made through HMRC, and GOV.UK has detailed guidance with worked examples covering joint purchases, inherited property and divorce.
