How to Avoid Stamp Duty on Second Home: A Simple Guide

In this article we shall know about how to avoid stamp duty on second home or reducing the amount of tax. Also will discuss claiming back stamp duty on second home.

Buying a second home is exciting, but there’s a cost involved called Stamp Duty, a tax in the UK that must be paid on property purchases.When purchasing a second home property, one is subjected to the higher tax rate because of a 3% surcharge. 

What Is Stamp Duty?

SDLT also known as Stamp duty is a tax that is paid in UK time each time an individual buys a property. To be more expensive, for second home buyers there is a surcharge of 3% and this makes it expensive for home buyers. Here are the strategies that one might use in case he or she is interested in finding how to avoid stamp duty on second home.

Why Buy a Second Home?

Originally the main reason for purchase of second homes can be classified as follows: They may require a second home for holidays, a residence near the workplace or a home to let. However, with multiple properties come more taxes such as stamp duty on a main residence if you own another property.  So, we need to examine how some of these costs could be controlled.

Who Pays Stamp Duty on a Second Home?

Stamp duty on a second home is paid by the buyer, out of which percentage is to be paid by the first time buyers. If you own one home as you purchase another home, then you will likely need to pay stamp duty on a second address.

But this rule does not apply if the cost of a property is less than £40,000 or if the property is a mobile home, caravan, house boat, and others. But in most cases, this second property will attract stamp duty surcharge.

How to Avoid Stamp Duty on Second Home:

Here are a few methods to help you legally avoid or reduce stamp duty on a second home:

1. Buy a Cheaper Property

This means that until your second home reaches the value of £40,000, you don’t pay stamp duty on it. But often, such properties can be hardly found or are extremely cheap, which on one hand can be rather alluring if a property is located in a popular area. Nevertheless, this is one of the ways through which those with a small capital can escape from the tax.

2. Transfer Ownership to a Family Member

The second idea on how to redistribute the ownership is to transfer it to a family member.

Assignment of one property to a spouse or family member may at times alter how stamp duty on main residence if you own another property is charged. 

For information ‘i’ about the surcharge, however, it is always advisable to seek legal advice first as there are conditions that go with this option.

3. Replace Your Main Residence

But if you are selling your current 1st home where you live and buying another 1st home then you might be able to avoid the surcharge even if you have a second home. You should take this opportunity to recommend a change in the property you make your home to the new property because normally you can avoid the extra stamp duty cost.

4. Buy with Someone Who Doesn’t Own Property

To buy with restricted conditions, do so with someone who has no assets.

Driving down stamp duty may be achieved by purchasing with someone who has no interest in any property. 

This will be an added cost if you let the new property be bought under their name, so you could avoid the additional tax. But it is crucial to consult more about co-ownership of the house since it is a financial and legal cooperation.

5. Second home Stamp Duty Refund: the 36-Month Rule

Additional stamp duty which might have been paid when purchasing the second residence, and claiming back stamp duty on second home. Sell your first home within three years and it is possible for you to get stamp duty relief on a new home. This rule may be handy for those intending to transfer permanent addresses after purchasing a new home.

How to reclaim Stamp duty on second home?

If you’ve paid stamp duty on a second home but later qualify for a refund, here’s a simple way to claim it back.

Sell Your Main Home: Ensure that you dispose of your first home within 36 months after purchasing the next one.

Submit a Stamp Duty Refund Application: If you no longer live in your main home, use a refund application on the official government website.

Provide the Necessary Documents: Make sure you have copies of documents that are required when selling the first home and information about the second property purchased.

Wait for Approval: Once you have submitted your application the government will review it. You will also get a rebate of excess stamp duty on a second home if you paid it.

Owning Another Property and Stamp Duty:

An additional 3% stamp duty is charged when buying a stamp duty on main residence if you own another property. If it is to be your principal residence and you sell the other main residence, you can sometimes avoid the additional one. You should go to a tax consultant or lawyer in order for you to make certain that you are taking the right courses of action.

Helpful Information Concerning Ways of Exemptions on Stamp Duty for a Second Home

Stay Informed: Stamping is a constant tax regime; therefore, you need to stay updated with any new legislation.

Having knowledge about rates and exemptions is valuable if you would like to save money.

Plan Early: For those of you who are planning to invest in a second home, you should look at the above options from the start. Consulting a tax advisor is always advised since they will assist you to find the most suitable strategies.

Think of Family Options: Incorporation of property to a family member can be considered a legal and strategic move particularly in this case if an intention is to avoid stamp duties.

Conclusion:

Additional stamp duty is incurred when buying a second home, however, there are different ways of how to avoid stamp duty on second home within 36 months rules and others. It is possible to avoid high expenses and get a great return on investment if you follow the guidelines and address a professional.