If you already own a home and you're buying somewhere else to develop or let out, you'll almost certainly be paying the additional property rates of stamp duty. It's one of the costs people most often get wrong in an appraisal. Usually they've worked it out on the normal rates and forgotten the extra.
This is for England and Northern Ireland. Wales has its own version called Land Transaction Tax and Scotland has LBTT, and both use different bands.
Stamp duty isn't one rate on the whole price. It's charged in bands, and each rate only applies to the part of the price that falls inside that band. If you already own a property you pay the additional property rates, and they're the same whether it's your second property or your tenth.
| Part of the price | Only home | Additional property |
|---|---|---|
| Up to £125,000 | 0% | 5% |
| £125,001 to £250,000 | 2% | 7% |
| £250,001 to £925,000 | 5% | 10% |
| £925,001 to £1.5m | 10% | 15% |
| Over £1.5m | 12% | 17% |
What catches people out is the first row. Even the part that would normally be tax free gets charged at 5%.
Say you're buying at £300,000. Here's how it works out.
| Part of the price | Only home | Additional property |
|---|---|---|
| First £125,000 | 0% = £0 | 5% = £6,250 |
| Next £125,000 (£125k to £250k) | 2% = £2,500 | 7% = £8,750 |
| Last £50,000 (£250k to £300k) | 5% = £2,500 | 10% = £5,000 |
| Total | £5,000 | £20,000 |
So as an additional property you'd pay £15,000 more, which is just 5% of the full £300,000. That gives you a quick way to check your own figure. Work out the normal stamp duty, then add 5% of the whole price.
It's due within 14 days of completion and in most cases it comes out of your own cash, so it needs to be in the numbers from day one rather than found later.
There are a few situations that can change the bill, though none of them are simple.
Buying through a limited company means you pay the additional property rates whether or not you personally own anything else. For residential property over £500,000 bought by a company there's a flat 17% rate unless a relief applies. Property development is one of those reliefs, but it has to be claimed properly, so talk to an accountant before you exchange.
If the property is mixed use, like a shop with a flat above, the non-residential rates may apply instead. They're lower and there's no surcharge. Some buyers have also tried arguing a property is uninhabitable so it should be taxed as non-residential. HMRC has won most of those cases at tribunal, so I wouldn't bank on it.
If you're replacing your main home and haven't sold the old one yet, you'll pay the additional property rates on the new one but can claim the extra back if the old one sells within three years.
Avalor works out stamp duty on every appraisal at the additional property rates and shows the band breakdown, so you can see exactly how much of the bill is the extra 5%.