Holiday Let Stamp Duty Guide

Holiday Let Stamp Duty Guide

Use the quick links below to find out about a particular topic, or continue reading our holiday let Stamp Duty Guide.

• What is Stamp Duty?
• Stamp Duty Land Tax rates for residential properties
• Higher rates of Stamp Duty Land Tax (SDLT) explained
• When do the higher rates of Stamp Duty apply?
• How much is holiday let Stamp Duty?
• When the higher rate Stamp Duty no longer applies
• Do I qualify for a higher rate Stamp Duty refund?
• Potential relief from higher rate SDLT
• How to offset the cost of holiday let Stamp Duty
• Expert holiday letting advice in South Devon

What is Stamp Duty?

Stamp Duty or Stamp Duty Land Tax (SDLT) is a cost a buyer must pay when purchasing a residential property, or a piece of land in England and Northern Ireland, worth more than £250,000.

The charge works on a tiered basis and is only applicable after the minimum threshold price is reached, which increases in relation to the value of the property thereafter.

Stamp Duty Land Tax rates for residential properties

 Information sourced from HMRC website

The rules and regulations are updated periodically, so it is advisable to make sure you are aware of the impact it will have on your purchase price. Find out further information from HMRC on stamp duty.

Click below to calculate your Stamp Duty Land Tax (SDLT):

Stamp Duty Calculator

Higher rates of Stamp Duty Land Tax (SDLT) explained

When you buy any property, you will be required to pay Stamp Duty. If the property is in addition to your main residence that is not replacing your main residence, be it a second home, a furnished holiday let or a buy-to-let, you will have to pay the higher Stamp Duty Land Tax rates.

When do the higher rates of Stamp Duty apply?

You will be required to pay the higher rate of Stamp Duty if the following applies to your situation:

• The additional property you are purchasing is worth £40,000 or over, and any property you own is also worth £40,000 or more.
• You have not sold or gifted your previous main residence.
• If you are in a civil partnership or marriage, the regulation on higher rates of SDLT apply to both as if you were buying the property together. If either of the individuals have to pay the higher rates, the other must pay the same.

These stamp duty land tax rates start at 3% and then rises in bands, climbing to 15% for the most expensive properties.

 Information sourced from HMRC website

How much is holiday let Stamp Duty?

Here is an example of how to work out Stamp Duty on your holiday let:

If you purchase a house that is in addition to your main residence for £300,000, the higher rates SDLT you owe on the purchase will be calculated as follows:

• 3% on the first £250,000 = £7,500
• 8% on the final £50,000 = £4,000
• Total SDLT = £11,500

Click below to calculate your higher rate Stamp Duty

Holiday let Stamp Duty Calculator

Visit HRMC’s guidance on higher rates of Stamp Duty Land Tax for more information on the topic.

When the higher rate Stamp Duty no longer applies

There are occasions where the higher rate Stamp Duty no longer apply. These include:

• When the new property purchased is used as the buyer’s main home.
• The owner/s sell or gift their existing main home owned before the new property was purchased.
• If the property is worth less than £40,000.
• If the property is ‘moveable’. This includes caravans, houseboats or mobile homes (as long as it doesn’t become a permanent fixture).

Do I qualify for a higher rate Stamp Duty refund?

If you sell your previous main residence within 3 years you may be eligible for a refund of Stamp Duty higher rate charge. You must apply for any repayment within 12 months of selling your previous main residence.

You can apply for a repayment of the higher rates of SDLT as long as you are the main buyer of the property or the agent acting for them.

Apply for a repayment of the higher rates of Stamp Duty Land Tax via the HMRC’ online form.

Potential relief from higher rate SDLT

There are certain transactions that may qualify for a ‘relief’ that reduces the amount of higher rate SDLT you have to pay. These often come with specific conditions and criteria that need to be met in order to qualify.  These include the following:

• If you are purchasing more than one dwelling in a single transaction (e.g., a property with a separate annex), you might be able to claim multiple dwellings relief, which could reduce the overall SDLT liability, for example, multiple dwellings relief.
• If you are purchasing a property with both residential and non-residential elements, such as a property with a shop or office space, you might be able to claim relief from the higher rates on the non-residential portion.

It’s important to carefully review the official guidance from HM Revenue & Customs (HMRC) or consult with a tax professional to determine your eligibility for any of these reliefs and to understand how they might apply in your situation. Read the HMRC’s guidance on Stamp duty land tax relief for more detailed information.

How to offset the costs of holiday let Stamp Duty

Providing your finished holiday let meets the required criteria, there are a few favourable tax benefits which cold help offset the cost of higher rates on holiday let Stamp Duty.

Rental income

Short-term holiday lets tend to yield higher profits compared to other property rentals. The weekly rate charged for holiday lets are significantly higher, which increases your income potential and can help offset the additional cost over time.

Tax deductible expense and capital allowances

There are certain allowable expenses and running costs which are associated with running a holiday let business. Some of these can be deducted from your pre-tax income and provide additional way to recuperate the higher rate of holiday let Stamp Duty.  Read our blog which covers in detail the costs of run a holiday let.

Capital Gains tax relief

When the time comes to sell your property, providing you sell at a profit, you may have Capital Gains tax to pay. Fortunately, if you meet the conditions to be a Furnished Holiday Let, there are a few different Capital Gains tax relief options available.

You may be able to pay less Capital Gains Tax when you sell your Furnished Holiday Let if you qualify for Business Asset Disposal Relief. This means that when you sell your property, the tax rate will only be 10%.  Business Asset Rollover and Gift Holdover Relief are other possible avenues to receive respite from taxation.

Read our comprehensive guide to Furnished Holiday Let tax for a detailed look at the other tax advantages you could use to offset this additional expense.

Expert holiday letting advice in South Devon

At Coast & Country Cottages, we pride ourselves on the outstanding local service we offer, delivering exceptional results with high levels of booking and income for our owners. We can provide support and advice on every aspect of making your investment a success, from planning and development to income forecasts and interior design.

Request your FREE Owners Guide

We’ve put together a selection of blogs to help answer your queries and take the hassle out of holiday letting:

Electric charging point installation for holiday lets

Holiday let rules and regulations

Where to buy a second home in South Devon

If you would like to find out more about letting your holiday home, call our experienced team on 01548 843773 (option 2) or visit our Let Your Cottage page to request a free Owners Guide today.

At the time of publishing (25/08/23), Coast & Country Cottages has taken all reasonable care to ensure that the information contained in this article is accurate. However, no warranty or representation is given that the information is complete or free from errors or inaccuracies. Generic information is contained within this article and each individual’s financial affairs are different, further advice should be sought from a financial advisor.