Keeping Your Old Home and Buying a New One: Second Home Surcharge
When you retain your existing property and buy a new one, the 5% additional dwelling surcharge applies to the entire new purchase. Here is exactly what you will pay — and whether you can reclaim it later.
Last verified: April 2026
Key Takeaways
- •The 5% surcharge applies to the entire purchase price when you already own a property worth ≥ £40,000.
- •At £350,000 the surcharge adds £17,500, taking total SDLT from £7,500 to £25,000.
- •Holiday homes, overseas properties, and rented investment properties all trigger the surcharge.
- •If you later sell the old property within 36 months, you can reclaim £17,500 from HMRC.
- •Properties under £40,000 are excluded from the higher rate test.
In this article
When the Surcharge Applies
The higher rates for additional dwellings (HRAD) apply whenever a buyer owns — or has a beneficial interest in — a residential property with a market value of £40,000 or more at the effective date of the new purchase. The surcharge adds 5 percentage points to each SDLT rate band.
The types of existing property that trigger the surcharge include: your current main residence (if you are buying a new home and keeping the old one), a buy-to-let property, a holiday home, an inherited property, and overseas residential property. The surcharge applies regardless of whether the existing property is mortgaged or owned outright.
There is an important exception: if both completions — the sale of the existing property and the purchase of the new one — occur on the same day, you qualify as a standard purchaser replacing your main residence and pay standard rates.
£40,000 threshold: The surcharge only triggers if the existing property has a market value of £40,000 or more. This is assessed at the date of the new purchase, not the original purchase price. Very low-value properties, including some fractional ownership arrangements, may fall below this threshold.
Higher Rate Table
The higher rates add 5 percentage points to each standard band. The full rate structure for additional dwellings (from 1 April 2025) is:
| Purchase Price Band | Standard Rate | Higher Rate |
|---|---|---|
| £0 – £125,000 | 0% | 5% |
| £125,001 – £250,000 | 2% | 7% |
| £250,001 – £925,000 | 5% | 10% |
| £925,001 – £1,500,000 | 10% | 15% |
| Above £1,500,000 | 12% | 17% |
The 5pp surcharge is applied on top of the standard rates at every band, including the nil-rate band (which becomes 5% instead of 0% for additional dwellings).
Worked Example at £350,000
David already owns his flat and is buying a second property at £350,000, which he intends to keep as a rental property while remaining in the flat. The higher rates apply.
Standard Rates
| Band | Tax |
|---|---|
| £0–£125k @ 0% | £0 |
| £125k–£250k @ 2% | £2,500 |
| £250k–£350k @ 5% | £5,000 |
| Total | £7,500 |
Higher Rates (David)
| Band | Tax |
|---|---|
| £0–£125k @ 5% | £6,250 |
| £125k–£250k @ 7% | £8,750 |
| £250k–£350k @ 10% | £10,000 |
| Total | £25,000 |
Standard Rates
£7,500
Higher Rates (David)
£25,000
Surcharge Cost
+£17,500
Reclaimable in 36 months
The 36-Month Refund Rule
If you paid the higher rates because you owned an existing property, and you subsequently sell that property within 36 months of the new purchase, HMRC will refund the surcharge element. This refund provision was introduced to avoid penalising buyers who buy a new property before their existing one sells — a common occurrence in property chains.
The 36-month clock starts from the effective date of the new purchase (usually completion). You must sell the old property within this window. There is also a parallel deadline: claims must be submitted within 12 months of the old property's sale date, whichever deadline is later.
Refund Eligibility Checklist
- The new purchase was of a residential property in England or Northern Ireland.
- Higher rates were paid on the new purchase because you owned an existing residential property.
- You have sold that existing property within 36 months of the new purchase.
- The old property was your only or main residence (note: buy-to-let refunds are handled differently — seek advice).
- You have not bought any further residential properties since the new purchase.
No extension: HMRC does not grant extensions to the 36-month window, even in exceptional circumstances such as a collapsed sale chain. Once the deadline passes, the surcharge is permanently non-refundable.
How to Reclaim
Reclaiming the surcharge requires a written claim to HMRC. The process is straightforward but must be initiated within the relevant time window.
Locate your SDLT transaction reference
This appears on the SDLT5 certificate issued when you completed the original purchase. Your conveyancer should hold a copy.
Gather evidence of the old property's sale
HMRC will require evidence that the old property has been sold — typically a copy of the transfer deed (TR1), the completion statement, or the Land Registry title register showing the new owner.
Submit the claim in writing
Write to HMRC Stamp Duty Land Tax, quoting the SDLT reference, the address of both properties, the completion dates, and the amount of surcharge paid. Claims can be submitted online via the GOV.UK SDLT overpayment relief form or by post.
Await HMRC repayment
HMRC will review the claim and, if satisfied, repay the surcharge element of the original SDLT payment. The standard SDLT portion is not refunded — only the additional 5pp surcharge.
Frequently Asked Questions
The £40,000 threshold — what counts?
Any residential property with a market value of £40,000 or more triggers the surcharge. This includes holiday homes, rented investment properties, and overseas residential properties. The £40,000 threshold applies to the market value of the existing property at the date of the new purchase, not its outstanding mortgage or original purchase price.
Can I avoid the surcharge by selling my old home on the same day?
Yes. If both completions — the sale of your old home and the purchase of your new one — occur on the same day, you qualify as a standard purchaser replacing your main residence and pay standard rates without any surcharge.
What if my old property is worth less than £40,000?
Properties with a market value under £40,000 are excluded from the higher rate test entirely. If your existing property falls below this threshold, you would pay standard residential SDLT rates on the new purchase.
How do I reclaim the surcharge?
Write to HMRC within 36 months of the new purchase completion (or within 12 months of the old home's sale, whichever deadline is later). You will need the original SDLT transaction reference number and evidence of the old property's sale, such as a copy of the transfer deed or completion statement.
Emma Richardson, MRICS
Chartered Surveyor & Property Tax Specialist
Emma Richardson is a RICS-qualified Chartered Surveyor with over 12 years of experience in UK property taxation. She founded Calculate My Stamp Duty UK to help buyers understand the complex world of property transaction taxes.
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