Last week, the Chancellor Rishi Sunak announced a cut in stamp duty to 0% for the first £500,000 of the property purchase price in order to kick start the housing market. But does this stamp duty cut apply to second properties?
The answer to this question is yes and no. The way that stamp duty is calculated on a second property is that you basically pay an additional 3% of the purchase price on top of the standard stamp duty that is payable on a residential property (assuming that the property you are purchasing costs more than £40,000).
This 3% rate has not changed in the announcement by Mr Sunak and that is still due to be paid on additional property purchases.
However, the ‘yes’ part is that the initial amount that stamp duty is calculated on – being the standard residential stamp duty rate – will incorporate the reduction in stamp duty.
For example, if you purchase a second property for £300,000, then previously you would have paid £5,000 at the basic rate of stamp duty and an additional 3% of the purchase price (£9,000) on top, so a total of £14,000 for that property. But with the nil rate for the first £500,000 this now means that you would pay just the £9,000 for second properties costing £300,000.
If a property costs more than £500,000 then you would pay the stamp duty due on the amount over £500,000 and then the 3% on top of that.
So effectively you are getting a reduction in the stamp duty that you would pay on a second property, but the actual second property rate is not changing.
You can calculate how much stamp duty is payable by checking out out calculator page.
You should always check with your conveyancer whether the additional rate of stamp duty is payable on your purchase as it may depend on your personal circumstances.