Helpful advice around Stamp Duty

Understanding Stamp Duty for Holiday Cottages

Purchasing a holiday cottage can be an exciting investment, offering both a personal retreat and a potential source of income. However, one crucial aspect to consider is the Stamp Duty Land Tax (SDLT) that applies to such properties. Here’s a comprehensive guide to help you navigate the intricacies of stamp duty for holiday cottages.

Always consult the latest guidance on GOV.UK: Stamp Duty Land Tax.

Polished Pebble, Beadnell Ref. 1122043

What is Stamp Duty Land Tax (SDLT)?

Stamp Duty Land Tax is a tax levied on property purchases in England and Northern Ireland. The amount of SDLT depends on the purchase price of the property or piece of land and whether it is your primary residence or an additional property.

Current SDLT Rates (Effective from 1st April 2025)

For main residential properties the SDLT rates are tiered as follows:

• Up to £125,000: 0%
• £125,001 to £250,000: 2%
• £250,001 to £925,000: 5%
• £925,001 to £1.5 million: 10%
• Above £1.5 million: 12%

For example, if you purchase a house for £295,000, from the 1st April 2025 the SDLT would be calculated as follows:

• 0% on the first £125,000
• 2% on the next £125,000 (£2,500)
• 5% on the remaining £40,000 (£2,250)

This totals £4,750 in SDLT.

Higher Rates for Additional Properties

Higher rates Stamp Duty was previously 3%, however, this increased to 5% as of 31st October 2024 (known as the Higher Rates for Additional Dwellings, or HRAD) 

If you are buying a second home this applies across each band:

• Up to £125,000: 5%
• £125,001 to £250,000: 7%
• £250,001 to £925,000: 10%
• £925,001 to £1.5 million: 15%
• Above £1.5 million: 17%

For example, purchasing a second property for £500,000 would incur SDLT as follows:

• 5% on the first £125,000 (£6,250)
• 7% on the next £125,000 (£8,750)
• 10% on the remaining £250,000 (£25,000)

This totals £40,000 in SDLT.

Here is a helpful Stamp Duty calculator to work out an estimate

When Higher Rates Apply

You will usually pay the higher rates if:

• The property you’re buying is residential, costs £40,000 or more, and you already own another property worth £40,000 or more.
• You part-own another property (anywhere in the world), and your share is valued at £40,000 or more.
• You’re buying a property in the UK but already own one abroad.
• You’re married or in a civil partnership, and your spouse or partner owns another property—HMRC treats you as one “unit”, even if you’re not buying together.

When Higher Rates Do Not Apply

The 3% surcharge does not apply if:

• The property being purchased is worth less than £40,000.
• The property is a moveable dwelling such as a caravan, houseboat, or mobile home.
• You’re replacing your main residence and have sold your previous main home either before or within 36 months of the new purchase (you may also be eligible for a refund of the higher rate in this case).

Some holiday homes are subject to planning restrictions—for example, they can only be used as holiday accommodation or cannot be used year-round. If in doubt, always consult a qualified tax advisor to assess the correct SDLT classification.

Regional Variations

In Scotland, the equivalent tax is the Land and Buildings Transaction Tax (LBTT), and in Wales, it is the Land Transaction Tax (LTT). These taxes have different rates and thresholds.

Tips for Managing SDLT Costs

• Plan Ahead: Factor in SDLT when budgeting for your holiday cottage purchase.
• Consult a Professional: Seek advice from a tax advisor or solicitor to understand your specific situation.
• Consider Timing: Be aware of any upcoming changes to SDLT rates or thresholds that might affect your purchase.

Read more detailed advice from our parent company blog Stamp Duty on Holiday Lets: Complete Guide | Sykes Cottages

Finally…

Need help with a tax question? Zeal have a free helpline for Sykes and our brand owners, get in touch via Sykes@gozeal.co.uk and as a Sykes owner you have the benefit of exclusive 10% discount on standard fees.

Understanding the SDLT implications for holiday cottages is essential for making informed investment decisions. By being aware of the rates and planning accordingly, you can better manage the costs associated with your property purchase.

Happy investing in your dream holiday cottage!

If you have any questions or need further assistance, feel free to reach out to the local Northumbria Coast and County Cottages team at the Alnmouth or Seahouses offices! Alternatively give the team a call on 01665 830783 or complete our online form here.

Disclaimer

The advice above is given by Zeal.  Northumbria Coast and County Cottages can’t advise you on, and isn’t responsible for, tax matters in relation to your holiday let and the above should not be taken as such, rather as a prompt of the issues involved for further consideration. As always, please read the relevant laws, regulations and guidance and seek advice from external experts where you require it. Northumbria Coast and County Cottages hopes that by pointing you in the direction of an expert in the field, it’s starting you off on the right foot, and you can read into this matter further and seek your own advice from Zeal, or your chosen advisor, as and when you feel it’s needed. We cannot make any representations or warranties of any kind as to the competency, qualification, fitness for purpose, accuracy, reliability, suitability, or availability of Zeal’s offers, products or services. If you choose to enter into any arrangement for the supply of goods or services of a supplier listed in this newsletter or links, you do so entirely at your own risk. Any such arrangement is between you and the supplier. We are not a party to it. We shall not be liable for any loss or damage arising under or in connection with any such arrangement or any action or decisions you take or do not take as a result of reading the above or any loss suffered as a result.