When it comes to buying property in the UK, stamp duty is one of the most significant upfront costs, and it can vary widely depending on the type of property you're purchasing. After the budget last week, it’s a subject that is on every property purchaser’s mind. Whether you're buying your main home, a second home, or an investment property like a holiday home, understanding the nuances of stamp duty is crucial.
In this blog we will break down how stamp duty differs for the different property types and explain how buying a Holiday Home at Cookswood could potentially save you £27,500 stamp duty on an £875,000 property.
Here’s a breakdown of how stamp duty differs for these three property types.
Stamp Duty Basics: What Is It and Who Pays?
Stamp Duty Land Tax (SDLT) is a tax paid to the UK government by buyers of property or land over a certain price. The rates vary based on the price of the property, and the situation of the buyer.
The specific rates you pay depend on:
The type of property: primary residence, second home, or holiday home
The purchase price
Regional variations, as Scotland and Wales have their own stamp duty systems
Personal situation
Marriage
Personal or company acquisition
Condition of the property
And many more
Now, let’s dive into how the rates compare across different property types.
Stamp Duty on Primary Residences
A primary residence is the main home where you spend the majority of your time. Stamp duty rates for primary residences in England and Northern Ireland are generally more favourable compared to second homes or holiday properties.
0% on first £250,000
5% on next £675,000
10% on next £575,000
12% on portion above £1.5 million
Stamp Duty Payable on an £875,000 purchase = £31,250
Note: First-time buyers enjoy further relief, with no stamp duty on properties up to £425,000 and 5% payable thereafter for properties up to £625,000 in total value.
Stamp Duty on Second Homes/Investment Properties
Buying a second home or an investment property such as a buy-to-let comes with an additional surcharge of 5% of the purchase price, on top of standard SDLT rates. This applies if you own property and are not disposing of your previous main residence.
Stamp Duty on Second Home
5% on first £250,000
10% on next £675,000
15% on next £575,000
17% on portion above £1.5 million
Stamp Duty Payable on an £875,000 purchase = £75,000
Stamp Duty on Commercial Property/Land
The following calculation is used for any property that isn’t residential in nature, and can be an office, a piece of land and in some instances can be used where some exemptions exist on the purchase of residential property.
0% on first £150,000
2% on £150,000 to £200,000
5% on portion over £250,000
Stamp Duty on Existing Holiday Lets/Holiday Homes
Existing holiday homes are typically classified as second homes and therefore the calculation for Stamp Duty on Second Homes/Investment Properties would typically be used. In some instances, holiday lets, or holiday homes can achieve an SDLT saving, reducing the SDLT from a residential to a non-residential rate on an existing structure, but this depends on a number of factors and advice from a specialist SDLT Consultant will need to be sought.
Stamp Duty on a Holiday Home at Cookswood
When you are purchasing a holiday home at Cookswood, the transaction is completed in two parts. You purchase the bare land and then sign a build contract for the house, not only does this mean you only pay stamp duty on the land, it also gives you the benefit of being able to bespoke the design of your own luxury holiday home.
Stamp Duty on Holiday Home at Cookswood
0% on first £150,000
2% on £150,000 to £200,000
5% on portion over £250,000
Stamp Duty Payable on an £875,000 purchase at Cookswood (assuming plot price of £325,000 and build price of £525,000) = £5,750
If you require any specialist stamp duty advice, we at Cookswood value Ben Gatford at Capex Associates advice (ben.gatford@capextax.com)
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice.