How To Avoid Stamp Duty On A Second Home

If you’re fortunate enough to be considering purchasing a second home, you need to be aware of stamp duty land tax, or SDLT.

This is a tax you pay to the government if you purchase a piece of land, leasehold, or freehold property.

You only pay stamp duty tax if the property is worth over a certain value, which can change depending on where you are in the UK.

This tax gets increasingly higher the more the property is worth and this can become a significant amount of money, so finding ways to avoid stamp duty can help.

If you are investing in buy-to-let properties in the UK, learning how to avoid stamp duty on a second home can be a good way to lower costs when investing.

Property investment can be a costly endeavour, so saving costs where you can is important.

This post will give you information on how much stamp duty you will pay in different parts of the UK, and ways to avoid paying stamp duty on a second home.

In most cases you will need to pay stamp duty or its equivalent when purchasing a second property. However, there are stamp duty exemptions, but they are often very specific requirements.

Usually, you cannot avoid paying stamp duty when buying property, but there are several ways of getting around it. HMRC has several stamp duty exemptions they abide by, but you may need to do more work to achieve these.

Purchase A Property Worth Less Than £40,000

If the property you are purchasing to be a second home is valued under £40,000, you do not need to pay stamp duty. This can limit the type of property you are purchasing and is likely more suited to buying land.

The average price of land in the UK is between £8000-£10,000 per square acre. This means you would need to develop properties on the land, driving up additional costs and making it long before you can use your second home.

New property tends to have a higher value, but unless you are willing to wait and have more funds set aside outside of the purchase price, then this is not a cheap way of avoiding SDLT.

Purchase A Mobile Home

Mobile homes of any kind, such as a caravan or houseboat, do not require paying any stamp duty. If you are looking to use your second property as a holiday home, this can be a great way of avoiding stamp duty on a second home.

If you are looking to use your second home as an investment, such as turning it into a buy-to-let property, this is not the best way to avoid stamp duty. It will be harder to find tenants for a mobile home than it will for other forms of housing.

Purchase A Second Property To Be Your Main Residence

If you are purchasing a second home to move in there permanently, you will still have to pay stamp duty when making the purchase. However, if you sell your first property and move into your second home full-time within three years, you can claim the money back as a stamp duty refund.

You will need to sell your first property within three years to claim this stamp duty refund. If you are buying a second home to use as a holiday home, as a buy-to-let investment, or for other use, you will still have to pay stamp duty.

If it takes longer than three years to sell your first property, you will need to write to HMRC explaining why it took longer than three years to sell.

In the event of a divorce, you can put a ‘property adjustment order’ in place, which transfers ownership of the property solely to your former spouse. A divorce lawyer can help with this. Once this is in place, you can purchase an additional property without paying stamp duty.

If a ‘property adjustment order’ is not in place, you can claim a refund on your stamp duty after buying a new home the same way you would when buying a new home to be your main residence.

If you are looking to use your second home as an investment, such as turning it into a buy-to-let property, this is not the best way to avoid stamp duty. It will be harder to find tenants for a mobile home than it will for other forms of housing.