Second Home Stamp Duty: The 5% Surcharge Explained

If you already own a residential property and you are buying another one, you will pay significantly more in stamp duty. The additional property surcharge adds 5% on top of the standard SDLT rates for every band, and the extra cost can run into tens of thousands of pounds.

This guide covers who pays the surcharge, what the combined rates look like, how to calculate the bill, and the exemptions and refunds that might reduce it.

What Is the Additional Property Surcharge?

The additional property surcharge is an extra layer of stamp duty land tax (SDLT) that applies when you purchase a residential property in England or Northern Ireland while you already own another one. It covers second homes, buy-to-let investments, holiday homes, and any other additional residential property.

The surcharge was introduced in April 2016 at 3% on top of standard rates. In the Autumn Budget 2024 it was raised to 5%, effective from 31 October 2024. That means a second-home buyer now pays 5 percentage points more on every SDLT band than someone purchasing their only residence.

When Does the Surcharge Apply?

You will pay the 5% surcharge if all three of the following are true at the end of the day of your purchase:

• You already own, or partly own, a residential property anywhere in the world.
• The property you are buying is not replacing your main residence (or your old main residence has not yet been sold).
• The purchase price is £40,000 or more, and any property you already own is also worth £40,000 or more.

Common situations that trigger the surcharge include buying a second home, purchasing a buy-to-let property, keeping a former home after moving into a new one, and buying a property while you still own an inherited share in another residential property.

Combined SDLT Rate Table (Including 5% Surcharge)

The surcharge is added to each band, not charged as a flat rate on the whole price. Below are the combined rates that apply from 1 April 2025:

Purchase Price Band	Standard Rate	Surcharge	Combined Rate
Up to £125,000	0%	5%	5%
£125,001 – £250,000	2%	5%	7%
£250,001 – £925,000	5%	5%	10%
£925,001 – £1,500,000	10%	5%	15%
Over £1,500,000	12%	5%	17%

Because SDLT is a marginal tax, each rate applies only to the portion of the price that falls within that band — not to the entire purchase price.

Worked Examples

Example 1: £300,000 Second Home

You own your main residence and are buying a holiday cottage for £300,000.

With the 5% surcharge (additional property):

Band	Taxable Amount	Rate	Tax
£0 – £125,000	£125,000	5%	£6,250
£125,001 – £250,000	£125,000	7%	£8,750
£250,001 – £300,000	£50,000	10%	£5,000
Total SDLT			£20,000

Without the surcharge (standard rates):

Band	Taxable Amount	Rate	Tax
£0 – £125,000	£125,000	0%	£0
£125,001 – £250,000	£125,000	2%	£2,500
£250,001 – £300,000	£50,000	5%	£2,500
Total SDLT			£5,000

The surcharge adds £15,000 to the bill on a £300,000 second home.

Example 2: £500,000 Buy-to-Let Property

You own your main residence and are purchasing a buy-to-let investment property for £500,000.

With the 5% surcharge (additional property):

Band	Taxable Amount	Rate	Tax
£0 – £125,000	£125,000	5%	£6,250
£125,001 – £250,000	£125,000	7%	£8,750
£250,001 – £500,000	£250,000	10%	£25,000
Total SDLT			£40,000

Without the surcharge (standard rates):

Band	Taxable Amount	Rate	Tax
£0 – £125,000	£125,000	0%	£0
£125,001 – £250,000	£125,000	2%	£2,500
£250,001 – £500,000	£250,000	5%	£12,500
Total SDLT			£15,000

The surcharge adds £25,000 to the stamp duty on a £500,000 buy-to-let property.

Exemptions from the Surcharge

The 5% surcharge does not apply in the following situations:

• Replacing your main residence. If you sell your previous main home on or before the day you complete on the new one, the surcharge does not apply. If you buy before selling, you pay the surcharge upfront but can claim a refund once the old home sells (see below).
• Properties under £40,000. Any residential property purchased for less than £40,000 is exempt from the surcharge entirely.
• Caravans, mobile homes and houseboats. These are not classified as residential property for SDLT purposes, so the surcharge does not apply regardless of how many other properties you own.

Refund When You Sell Your Previous Main Residence

If you buy a new main home before you have sold your old one, you will pay the 5% surcharge at completion. However, HMRC allows you to claim a refund of the surcharge if you sell your previous main residence within 36 months of buying the new one.

To qualify for the refund:

• The new property must be your main residence.
• Your previous main residence must be sold within 36 months of the purchase date of the new property.
• You must apply to HMRC for the refund within 12 months of the sale of the old property, or within 12 months of the filing date of the SDLT return for the new purchase — whichever comes later.

Tip: Even if you intend to sell your old home quickly, budget for the surcharge at completion. The refund process takes time, and you will need the cash available upfront.

Scotland: Additional Dwelling Supplement (ADS)

Scotland has its own system called Land and Buildings Transaction Tax (LBTT), and its additional property charge is the Additional Dwelling Supplement (ADS).

The ADS is currently 8% and works differently from the English surcharge in one important way: it is charged on the full purchase price, not on a marginal band basis. That means for a £300,000 second home in Scotland, the ADS alone would be £24,000 (8% of £300,000), added on top of the standard LBTT bands.

The same 36-month refund rule applies — if you sell your previous main residence within 36 months, you can reclaim the ADS from Revenue Scotland.

Wales: LTT Higher Rates

Wales uses Land Transaction Tax (LTT) instead of SDLT. Additional properties in Wales are subject to higher residential rates, which follow a different band structure from England.

The Welsh higher rates range from 5% to 17% depending on the price band. Like SDLT, they are applied on a marginal basis, but the thresholds and percentages differ. For example, the starting band in Wales applies from £0 to £180,000 rather than £0 to £125,000.

If you are buying a second home in Wales, use the Welsh Revenue Authority's LTT calculator or our tool (select Wales as the location) to get an accurate figure.

Owning Property Abroad

One detail that catches many buyers by surprise: property you own anywhere in the world counts when determining whether the surcharge applies. If you own a flat in Spain, an apartment in Dubai, or a house in Australia, buying a home in England will trigger the 5% surcharge — even if the English property is your first UK home.

This also applies to inherited property. If you have inherited a share of a residential property overseas (or in the UK), it may count as an existing property for surcharge purposes. However, an inherited share of 50% or less is disregarded for three years from the date you became entitled to it. After that, or if your share is more than 50%, it counts.

Important: The worldwide ownership rule applies at the end of the day of your purchase. If you own property abroad at that point, the surcharge will apply to your UK purchase.

How to Reduce the Impact

While you cannot avoid the surcharge if it legitimately applies, there are a few things to consider:

• Sell before you buy. If you are moving home, completing the sale of your old property before or on the same day as the new purchase avoids the surcharge entirely.
• Use the 36-month window. If selling first is not practical, buy knowing you have three years to sell the old property and claim the refund.
• Check inherited property rules. A minor inherited share may be disregarded — take advice before assuming the surcharge applies.
• Consider the property type. If you are looking at houseboats or park homes, these fall outside the surcharge rules.